Corven: Seizing the Opportunity


The Corven group of companies is an important part of the Argentine automotive market, as both importer and exporter. As such, it values the support of a bank with global trade experience combined with an extensive local presence.

Corven

Client

Apart from long term relationship benefits, this collaboration also makes it easier for the company to grasp major opportunities quickly. Which is why when Corven needed a substantial letter of credit to take advantage of a major exchange rate opportunity, it turned to HSBC.

The Corven relationship with HSBC began in 2006, when Corven SACIF (the Corven shock absorber and auto parts business) opened accounts with the bank. HSBC was keen to foster the development of a long term relationship and so offered the company credit facilities at a highly competitive interest rate. In 2008 Corven's agriculture and livestock business also became a client and this was followed in 2010 by Corven Motos (the Corven motorcycle business). Again, in the interests of developing a long term relationship, HSBC provided highly competitive funding.

Commercial opportunity
In 2015 Corven Motos was particularly keen to expand its relationship with a major brand name Indian motorcycle manufacturer. While Corven already had its own brand motorcycle assembly and resale business based on its relationship with a Chinese manufacturer, the products from this were primarily for the light use domestic market. By contrast, the Indian manufacturer's motorcycles were intended for more frequent or commercial use, such as by delivery riders. Therefore, Corven was keen to develop the relationship further.

Corven Motos already had a nationwide network, so its ability to place a substantial order could be a key factor in developing a stronger trade relationship with the Indian manufacturer.

HSBC understood the importance of this for the development of Corven Motos and immediately responded by making a substantial letter of credit (LC) available. An additional convenience was that the Indian manufacturer was also an HSBC client. This not only meant that it was immediately content to accept an LC bearing HSBC's name, but also that processing of the transaction would be appreciably faster since HSBC was banking both participants.
Equipped with the advantage of an HSBC-issued LC,  Corven was able to place an immediate major order for the Indian motorcycles. This made a very considerable difference to Corven's potential profit on the transaction.  A further consequence of the order size was that the Indian manufacturer has since appointed Corven Motos as its national distributor for Argentina.

E-Comex
While the LC backed Indian import order has been a major recent landmark in the Corven/HSBC relationship, it is by no means the only one. Since 2013 HSBC has been active in supporting Corven  Group's expansion of its production and logistic capacity with credit facilities. This has resulted in an increase in group companies' foreign trade transactions.

Until the change of government, this increase in foreign trade had considerable implications for the Corven companies' administrative workload because of Argentina's foreign exchange regulations. Under these, banks could only undertake trade-related foreign exchange transactions if they had received and certified specific documents from the Argentinean importer/exporter. However, Corven Motos and Corven SACIF are based in Venado Tuerto, some 150 kilometres from the HSBC offices in Rosario, which would have made the delivery of large volumes of physical trade documentation laborious and impractical. HSBC therefore provided the Corven companies with access to its E-Comex platform, which meant they could upload the necessary documentation electronically, thus saving significant time and cost on import/export administration. 

Cheque discounting
The use of deferred payment cheques for commercial settlements is commonplace in Argentina and they are also an important part of everyday business for Corven. For instance, Corven Motos sells motorcycles to a large number of small independent distributors around Argentina, who represent a major part of its customer base. It is usual practice for these distributors to settle their invoices using a combination of cash, and current/deferred payment cheques. The value of Corven's strong brands are an important  disincentive to cheque default, as its distributors clearly do not wish to jeopardise their distributorship status.
HSBC assists Corven in its acceptance of deferred payment cheques by providing a discounting facility. It purchases payee cheques from Corven across a range of maturities. This not only enhances Corven's cash flow, it also reduces its workload in handling and managing paper payments.

Future developments: supplier payments
The most recent development in the relationship between Corven and HSBC is supplier payments, where the company will be taking advantage of HSBC's electronic local supplier payment services. This cash management solution will further streamline Corven companies' financial processes and reduce costs when implementation is completed in H2 2016.

Conclusion
In many ways Corven exemplifies the advantages of developing a long term banking relationship with HSBC. For example, HSBC's knowledge and understanding of the Corven Motos business meant that it was able to take a quick and positive decision in issuing an LC that had long term beneficial implications for the company's business. More generally, it has also made it possible for HSBC to provide the most appropriate facilities and solutions for Corven on advantageous terms.

About the client
Corven, a combination of the words “Córdoba” and “Venado Tuerto”, was founded in 1969 at Venado Tuerto by the father of the current company president, Leandro Iraola. The Corven group of companies operating in the automotive sector - Corven Autoparts, Sadar Shock Absorbers, Corven Shocks & Struts and Corven Motorbikes - are all part of the Coverna Group. There are also other Corven entities active in the agricultural and real estate sectors.
The original company business was producing high quality shock absorbers capable of coping with the harsh conditions of Argentinean and South American roads. This original business - Corven SACIF - has expanded considerably and now sells into more than 35 countries around the world. The company has also expanded the range of automotive components it manufactures to include items such as brake pads, brake discs, drive shafts and clutches.
At the same time, the company has been expanding the physical footprint of its auto parts activities. In 2007, it started operating in Brazil, with a distribution centre in Sao Paulo and in January 2012 another warehouse was opened in the state of Santa Catarina. The Corven Brazilian subsidiary currently has an 8% share of the Brazilian automotive shock absorbers aftermarket.

Corven Motos, the Corven motorcycle business, began trading in June 2007 close to the Industrial Park La Victoria, in Venado Tuerto, that is home to Corven SACIF. It has since grown to become one of the leading companies in the motorcycle manufacturing sector in Argentina. Corven Motos has two main lines of business: it manufactures and sells motorcycles under its own name and it holds the nationwide distributorship for a major name brand Indian motor cycle.

Apart from long term relationship benefits, this collaboration also makes it easier for the company to grasp major opportunities quickly. Which is why when Corven needed a substantial letter of credit to take advantage of a major exchange rate opportunity, it turned to HSBC.

 


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