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Problem Solved: 
Ildikó Gyurján, Suzuki

Ildikó Gyurján, Deputy CFO, Magyar Suzuki Corporation

Hungary’s Suzuki car manufacturing is focused on exporting to other countries in the CEE. In order to optimise liquidity management, Hungarian banking partner K&H Bank (a member of the KBC Group), proposed opening a foreign revenue collection account in Slovakia together with the introduction of an international zero balancing cash pool for Suzuki.

Ildikó Gyurján

Deputy CFO

Suzuki is the 12th largest passenger car manufacturer in the world, employing more than 45,000 people across 163 countries. Production in Hungary started in 1992 and annual production capacity reached 280,000 vehicles in 2008. The company’s domestic market share is around 18% and Suzuki has led the new car sales list for 12 consecutive years. Almost 3% of the entire export volume of the Hungarian economy is produced by Magyar Suzuki Corporation.

Problem…

The driving force behind Hungary’s Suzuki car manufacturing is export. As such, it is extremely important – in terms of the company’s liquidity management – that the revenue from cars sold is sent from the foreign dealers to the Hungarian financial centre’s account as soon as possible. Foreign partners usually pay for the vehicles through international funds transfer, so payment takes at least two days. The revenues could only be received earlier if the transfer costs were increased; however, dealers would not be ready to pay these higher costs.

In recent years, Suzuki’s export turnover has achieved a notable increase in Slovakia, so it is in this country where we tried to find a solution to this problem first of all.

…Solved

After reviewing our needs, our Hungarian banking partner K&H Bank (a member of the KBC Group), proposed opening a foreign revenue collection account in Slovakia together with the introduction of an international zero balancing cash pool for Suzuki.

When implementing this solution, we asked the Slovakian Suzuki dealer network to use this collection account managed by CSOB –the local member of the KBC Group – for the payment of vehicles instead of using international transfers as they had done previously.This solution has proven to be extremely advantageous for the dealers because they can settle their accounts payable through cheaper domestic transfers instead of costly international transfers. It also takes less time to make a domestic transfer: where the dealers have accounts at CSOB, the money is credited to Suzuki’s account on the same day, and where accounts are held at other banks, funds are credited on the next day.

As a second step, it was important to ensure that the amount credited to the Slovakian collection account was transferred to the Hungarian central account as soon as possible, since export revenues are utilised where the goods are produced. In order to facilitate this, we introduced the international zero balancing cash pool service. The international cash pool is available for accounts managed in the same currency. In the case of Suzuki, transfers were performed between Hungary and Slovakia in Slovakian koruna until 31st December 2008, then in euro after the country’s admission to the Eurozone at the beginning of 2009.

The introduction of the international cash pool system means that the full end-of-day balance managed at the Slovakian account is transferred to our account in Hungary every day without submitting separate transfer orders each time. The banks performing the zero balancing transactions are all members of the KBC Group and, as such, there is no value date loss for Suzuki. In practice, this means that an amount paid by a foreign partner on Monday (D) is available in the Hungarian account, managed at K&H Bank, by Tuesday morning (D+1), and the amount transferred is included in the previous day’s value account balance (D).

Movements of funds on the foreign account are monitored electronically using the KBC Group’s internet-based software (w1secorporate e-banking). This system makes it possible to keep a record of the amounts received from partners and the cash pool transfers. The w1se software is able to manage several accounts across various banks, so after a while our revenue collection account in Romania was also linked to the system, allowing further development of extended high-quality services.

As external financing costs have increased during the past year, it is extremely important to ensure that the liquidity management of the various countries is performed centrally. The international cash pool product and the w1se electronic account management system are excellent for this purpose as their introduction enables us to plan our revenues more efficiently and, all in all, mean cost savings for Suzuki.