Pre- and Post-Crisis Cash Management Priorities for Porsche
by Heimo Tiefenböck, Cash Manager, Porsche Holding GmbH (Austrian Porsche-Group)
There were several reasons why co-operation with Porsche for implementing cash pooling solutions has been very successful in the past. Some of these include our ability to create tailor-made solutions for corporate customers, UniCredit’s strong presence in Central and Eastern Europe and our depth of knowledge and expertise in cash management.
In the future, we are looking forward to implementing a new electronic banking solution with Porsche. We are very confident that ‘NEW eBANKING’ together with SWIFTNet Corporate Access will be instrumental in satisfying the requirements of Porsche Corporate Finance.
Angelika Ertl, International Cash Management Sales, UniCredit
Porsche has a central treasury department divided between Salzburg (the company’s headquarters) and Zürich. We have a centralised approach to liquidity, bringing together cash from across the business so that treasury can make investment and funding decisions on behalf of the group. In contrast, we manage payments and accounting locally, with wholesalers, retailers and finance branches producing their own accounts at branch level, and maintaining their own bank accounts within a central framework established by group treasury.
In this environment, we needed to find automated solutions to access liquidity, which we achieve by pooling our liquidity through a physical (zero balancing) cash pool with UniCredit, one of our core banking partners. This means that we can benefit from the advantages of a local approach to payments whilst managing liquidity on a net basis across the group, and ensuring that we have a complete picture of our global cash.
Dealing with the crisis
As we are a key player in the European automotive industry, the financial crisis had a significant impact on Porsche. Not only did we have to consider the implications of declining revenues, but our cash management structures were also under pressure. For example, we are active in Central and Eastern Europe, and to facilitate cash pooling, we had intraday and overnight limits on our master accounts. When the crisis first struck, our banks sought to reduce these limits as far as possible. While our average limit utilisation is well under our total limit, we needed the extra limit as a buffer to cover days with large volumes of payments.
A related impact of the crisis was that our refinancing needs reduced dramatically as a result of de-stocking and our non-investment strategy; from a cash management perspective, we still needed intraday limits. While we agreed to reductions in some limits where it was feasible to do so, we had to insist on maintaining them in most cases. This put pressure on some relationships, as it was an essential requirement for future co-operation in payment services, and we changed one of our banking partners as a result.
Within treasury, we recognised that having a comprehensive view of liquidity and the ability to access it easily was an essential requirement. For example, while cash flow forecasting had not been a significant priority before the crisis, it became more important. With a greater focus on liquidity, we looked at our activities in Central and Eastern Europe to ensure that we were centralising cash in the best way possible. This is particularly difficult as regulations can differ significantly between countries. In Poland, Slovenia, Hungary, Romania, the Czech Republic and Slovakia, we already had zero balancing arrangements in place. In countries such as Ukraine, however, we were not able to implement zero balancing as legal restrictions prevent cash being moved in and out of the country easily. We therefore needed to take organisational steps to make use of cash within the country, such as paying down inter company debt. We also had high stock levels in Ukraine, having launched the business there only a year before the crisis hit. Therefore, we needed to find solutions for refinancing this stock in the most efficient way.
In addition, we found that tax authorities in several countries, particularly in Eastern Europe, were scrutinising transfer pricing and refused to accept documentation that we had set up in the past to prove that our inter company interest rates had been set at market levels. Some of these demands were impossible to fulfil and the requirements were significantly different in each country. This issue is still subject to an ongoing discussion. At times, it appears that the only way to prove that we establish arm’s length internal pricing is to draw down under small external credit lines under local conditions but even then, this may not be sufficient for some authorities.