Wholly own Subsidiary of western Financial financial institution Incorporated: 1988 together Western Consumer company Employees: 2,094 full Assets: $1.05 exchange rate (2004) stock Exchanges: NASDAQ Ticker Symbol: WFSI NAIC: 522291 consumer Lending; 522110 advertising Banking; 541613 Marketing Consulting services

WFS jae won Inc. Is among the nation's largest independent auto finance companies, specializing in originating, securitizing, and also servicing new and pre-owned prime and non-prime credit quality automobile contracts through its nationwide network of 8,000-odd auto dealers. The firm offers refinancing and also end-of-term leasing choices directly come consumers. WFS Financial has headquarters in Irvine, California, and operates 39 offices nationwide. As a subsidiary of western Financial Bank, a federal savings financial institution exempt indigenous state laws, that is the just independent auto lender to enjoy federal preemption, or exemption indigenous state licensing and laws governing lenders.




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native a Statewide come a Nationwide Market: 1973–96

In 1973, Earnest S. Rady, chairman the Westcorp, the parent firm of western Financial Bank, started an live independence lending agency to administer car and also truck loan to consumers. The company, which listed an alternative to loan from manufacturers' loan arms, started operations v one dealer in California. That securitized the contracts through sales the investment-grade securities on wall Street, v the company servicing that loans.

The agency grew quickly for the remainder the the 1970s and throughout the 1980s, widening its territory and making auto loans to consumer through car dealerships. In 1988, it included as Western customer Service, a completely owned consumer finance subsidiary of western Financial Bank, to provide non-prime automobile finance services. This industry was one no serviced through the bank's auto finance division. In 1990, Western customer Service readjusted its surname to Westcorp jae won Services.

throughout the an initial half of the 1990s, WFS underwent steady expansion that nearly doubled that is size. By 1991, the agency had 32 offices. In ~ the next few years, it to be originating contract in seven, mostly western, states. Through 1995, WFS had a network that 14 dealer centers and 63 branch workplaces that covered 13 states, including two says in i m sorry the company did not have actually offices. The year, west Financial bank transferred its auto finance division to WFS, which readjusted its name again to WFS gaue won Inc. And made one initial windy offering.

also in 1995, joy Schaefer ended up being president and also chief operation officer that WFS Financial. One accounting significant at Wesleyan University, Schaefer graduated magna cum laude in the beforehand 1980s and also had join Westcorp in 1990 after ~ working v Liberty national Bank and also Illinois nationwide Bank and also as an audit manager v Ernst & Young LLP. In ~ Westcorp, she rapidly functioned her increase in the company, occupying several positions at there and at Westcorp's subsidiary, west Financial Bank.

as president and also chief operation officer of WFS Financial, Schaefer was important in orchestrating that is growth and development. Vain with various other lenders for borrowers increased in the mid-1990s, pushing loan prices downward, and WFS Financial, along with other auto financers, started to stretch its standards, acquisition on much more risk for less return by making loans to people with tarnished credit. Native 1996 to 1997, Schaefer spread a strategy because that aggressive expansion based on focusing an ext on the non-prime market.

throughout the second fifty percent of the 1990s, "WFS jae won continue to experience enhancing loan volumes as result of its geographical expansion and continued growth in currently markets," follow to Schaefer in a firm release. By 1997, the firm had issued loan in 32 states, with non-prime loans audit for fully 50 percent the the loan issued.

Unfortunately, this non-prime loans resulted in a sharp climb in the company's loan losses and also delinquencies in 1997. "Bankruptcies are at an all-time high," Lee Whatcott, the company's chef financial officer, remarked in a February 1998 Orange County register article. "We space tightening ours underwriting come make sure we gain paid because that the risks we take." in ~ the end of 1997, loan losses at WFS Financial reached a record high the 3.4 percent, and the company's income took a beating. Profits diminished 19 percent to $31.3 million. In ~ the finish of 1998, the agency posted accident of $16.6 million.

other auto lenders that also devoted in non-prime loans were likewise struggling with increasing delinquency rates and also increased competition, and many did no survive. WFS Financial take it stock of wherein it stood and also made the decision to slow down its expansion with fewer loan originations.


that company Restructuring: 1997–2000

In 1997, Schaefer, in ~ the age of 38, flourished Earnest S. Rady together chief financial officer that WFS Financial. The year, she additionally led the agency on a this firm restructuring plan. Having added 15 claims a year to its basic of operations in between 1994 and also 1996, WFS Financial's operations to be scattered, and also the company was plagued through redundancies. Schaefer's setup aimed to reduce these overlaps, boost leadership, and reorganize operations.

In 1997 and 1998, WFS Financial spent $40 million on brand-new technology and also replaced all but two top-tier executives. Beginning in 1998, the company combined the 15 element lending dealer centers and also 44 non-prime loan branch offices in the west states right into 12 local business centers and 15 satellite offices. Later that exact same year, the agency extended its organizational streamlining to WFS Financial's work in the main and eastern united States. As component of this restructuring, WFS jae won cut about 20 percent of its workforce, or 400 positions, and eliminated 96 offices. Upon perfect of the plan, the firm operated through 21 local business centers and also 26 satellite offices nationwide. The intent of the streamlining to be to administer dealers through a solitary point that contact, yet it additionally had an unanticipated side-effect. After ~ the firings and also office closings, droves the employees that were concerned about the company's financial difficulties quit, leaving behind a plethora of location to it is in filled.

by 1999, WFS Financial's turnaround to be complete, and the firm filed to market two million shares of usual stock, leaving its parent, western Financial Bank, with an 80 percent share of the company. Between 1985 and 1999, WFS Financial had securitized much more than $14 exchange rate of vehicle contracts, becoming the fourth-largest issuer of vehicle loans in the unified States. In 1999, the company collection a new mark when the car contracts the serviced totaled about $5 billion.

The year 2000 was a an excellent one because that WFS Financial. Increasing nonprime loan volume triggered new records in sales and profits, and also revenues boosted 26 percent to $4.2 exchange rate from $3.3 exchange rate in 1999. Net revenue surged 42 percent come $75 million. The agency securitized $16.6 billion of auto contracts. It likewise entered right into agreements to administer lending solutions for 2 leading online auto to buy services, CarsDirect.com and also StoneAge.com. WFS Financial ended up being the finance eight for the latter's newest program, the "StoneAge Driver."


changes in 2002 and Beyond

through 2001, with virtually 6,000 franchised certified dealer in WFS Financial's portfolio, including 5 of the ten largest dealer groups, WFS was among the 5 largest issuers of auto loans in the country. (The large Three automakers were the height three.) that year, the company made $8.2 billion in auto loans, and revenue was $602 million. This number represented an nearly 200 percent rise in sales end a three-year period. WFS Financial also acquired an interest in DealerTrack Holdings, Inc., an web business-to-business portal that lugged together finance companies and also dealers in 2001. However, WFS Financial's stock price ongoing to decline, leading Westcorp to decide in 2002, the it intended to gain the exceptional 16 percent of typical stock. The board later recanted this position when critics objecting, saying that such a relocate would be negative for the company's shareholders.

Schaefer resigned suddenly in 2002 and also left its board scrambling to uncover her replacement. It resolved on Tom Wolfe, who had been through the agency since 1998 and also was climate WFS Financial's president. When, during the second fifty percent of 2002, consumers, urged by short loan rates, carried out a credit-fueled safety spree, WFS skilled an increased need for its auto loans. By this point, only 20 percent of the company's loans to be non-prime. WFS Financial's customers, ~ above average, earn $50,000 a year and also borrowed $16,000 come buy a two-year old Honda or Toyota. Still, the agency contracted with Balboa Life & casualty in mid-2002 because that creditor-placed insurance allowance that transferred credit danger off that WFS Financial.


agency Perspectives:

ours dealer servicing and also underwriting capabilities and systems permit us to complete effectively in the vehicle finance market. Our ability to complete successfully depends mainly upon our strong personal relationships through dealers and their willingness to sell us contract that satisfy our underwriting criteria. These relationships are fostered by the promptness with which we procedure and money contracts, and the flexibility and scope that the programs us offer. We acquisition the full spectrum of prime and non-prime contracts secured by both new and pre-owned vehicles.


In 2003, market experts estimated that the vehicle finance team was the second-largest customer finance sector in the country, with an ext than $684 exchange rate of loan originations the year. However, over there was some slowing in sales growth because of the weakening economy. WFS Financial, which still offered its solutions to a wide variety of consumers, indigenous those with excellent credit ratings to those v some credit transaction challenges, announced the it had "seen an increase in non-performing loans in line through the weak economy and the fall in used automobile prices," according to a 2002 knight Ridder Tribune company News article.

In 2004, Westcorp and WFS Financial cleared up the terms of an agreement by which Westcorp would get the 16 percent that WFS jae won not already owned through its various other subsidiary, western Financial Bank. Before the acquisition, WFS Financial had to borrow native its parent company at third-party rates. However, once reabsorbed, the cost of funds would end up being the same as the expense to the bank. "We think that this transaction provides sense for both companies and also their shareholders," announced Rady, chairman that Westcorp, in a 2004 push release. The merger was unanimously approved by the plank of director of both Westcorp and also Western gaue won Bank.

back well-established throughout the country, WFS Financial continued to seek out avenues to construct its sector share, particularly in those states that it had entered due to the fact that the mid-1990s. Its goals consisted of increasing contract purchases indigenous its present dealer base and also developing brand-new relationships through dealers, specifically those law a high volume organization or ones through multiple locations. WFS Financial additionally sought to increase its market share that pre-owned automobile contracts.


principal Subsidiaries

WFS gaue won Auto Loans, Inc.; WFS financial Auto loan 2, Inc.; WFS Investments, Inc.; WFS Funding, Inc.; WFS Receivables Corporation; WFS Receivables copy, group 3; WFS net Investments.


Principal competitors

DaimlerChrysler Services; Ford Credit; basic Motors accept Corporation.




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key Dates:

1973:
Earnest S. Rady founds an independent auto loan company. 1988: The firm incorporates in California as Western customer Service. 1990: The firm changes its surname to Westcorp gaue won Services. 1995: western Financial financial institution transfers that auto finance division to WFS; WFS transforms its name again come WFS gaue won Inc. And also makes an initial public offering; happiness Schaefer becomes president and also chief operating officer the WFS Financial. 1999: WFS financial sells 2 million shares of usual stock. 1997: Schaefer succeeds Earnest S. Rady together chief executive, management officer the WFS. 2000: WFS gaue won enters right into agreements v CarsDirect.com and StoneAge.com. 2001: WFS Financial repurchase an interest in DealerTrack Holdings, Inc. 2002: Schaefer resigns and is changed by Tom Wolfe. 2004: Westcorp arranges to obtain the 16 percent that WFS Financial not owned by western Financial Bank.

more Reading

Armstrong, Douglas, "Judge Exempts California Lender from Wisconsin Laws," Milwaukee journal Sentinel , December 4, 1999, p. 1.

Hieger, Jennifer, "Irvine, California-Based Lender ago in rewarding Shape after Turn-around," Orange County register , September 17, 1999.

Kelleher, James B., "Irvine, California-Based Firm desires Stake in Auto-Loan Unit Back," items Ridder Tribune business News , July 18, 2002, p. 1.

"Nonprime Surge help WFS gaue won Sales Boost," Ward's Dealer service , June 2001, p. 9.

Sanders, Edmund, "California Auto Lender Will reduced Jobs by 20 Percent," Orange County register , February 11, 1998.

——, "WFS Financial write-ups Loss for an initial Quarter," Orange county register , April 23, 1998.

Vyas, Rajiv, "Auto loan Power expansion of WFS Financial, Westcorp," Orange County organization Journal , October 29–November 4, 2001, p. 28.