How AT&T, Ryder and loanDepot are managing high inflation
Inflation is at a 40-year high and the central bank may continue to increase interest rates until prices begin to fall back to sustainable levels. So, CFOs need to be prepared.
At Fortune’s virtual Emerging CFO event, in partnership with Workday, on Tuesday, my colleague Geoff Colvin and I had a discussion with John Diez, the CFO of Ryder, Nicole Carrillo, the CAO of loanDepot, and AT&T CFO Pascal Desroches. The leaders shared their thoughts on inflation, rising interest rates, and transparency.
Inflation slowed some last month, but Desroches said it may take a while for conditions to improve. “I think we are just at the very early innings of this problem,” he said. “When you look at the recent shutdowns in China and the fact that the Russian incursion into Ukraine is going to fundamentally change the supply-demand dynamics in energy, I’d be surprised if we are out of the woods on this in the next 12 months.”
“Over the course of the last couple of years, we’ve been focused on reducing our debt and increasing our financial flexibility,” Desroches said. AT&T’s separation from DirecTV and WarnerMedia and the rising demand for fiber and 5G allowed the flexibility to create a strategy for raising prices. Instead of just charging more for all of their services, the company focused on offering incentives for customers with older plans to change to newer ones with more advanced features and choices.
“While there will be increases, they’re going to get more value than they have under the old plan,” Desroches said. “We’re trying to cushion the blow by providing more value and more attractive returns for the incremental amounts that they’re paying.” He continued, “We waited a bit before increasing pricing. We just announced it recently. It was a very carefully deliberated decision because we understand every American is stretched right now.”
The fast increase in interest rates impacted loanDepot’s business overnight, Carrillo said. The formerly low-interest rates allowed the company to double its volume year over year, she said. “We were hiring and putting in technology innovations as fast as we possibly could in order to meet the customer demand,” she explained. “Refinance made up 60% of our volume over the last two years.”
But as interest rates have risen, there has been about a 60% decrease. “Obviously, when that much of your business declines, there’s going to be an impact on people,” Carrillo said. “You need fewer people, you’re doing less volume, but we try to figure out how we can repurpose them.”
The company began having a “huge focus” on retention of “the people that we need to continue to fund our purchases” to “continue to support that customer demand,” Carrillo said.
“We’ve certainly seen a double-digit jump in the cost of a commercial vehicle,” Diez said. Ryder has focused on increased communication with customers. “I think in this new environment, we’re having to go to our customers and educate them on what’s happening in the marketplace as many of these leases get renewed.”
Along with educating their consumer base, Ryder is “creating strategies that mitigate the inflationary pressures that they’re feeling so that they could pass it on to their customers,” Diez said.
He continued, “What we’ve done commercially with a number of our businesses is introduced language that provides a transparent feed for our customers around what’s happening on the input side, both from a wage perspective and labor inflation, as well as on a raw-materials basis, so that the customer feels like number one, they’re paying a fair price, and number two, they’re getting full transparency into that price.”
“One of the things that as a country we’re not talking nearly enough about is our employees’ well-being,” Desroches said. In the past few years, “employees have gone through a lot.”
See you tomorrow.
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