General Electric Co. is thinking more seriously about selling off large parts of its financial business, which by itself would be the country’s fifth-largest bank and which investors want to shrink.
The Wall Street Journal reported that CEO Jeff Immelt recently told a conference that the company is examining a range of strategic options that could include an initial public offering of some parts of the business, GE Capital. And as a measure of his commitment, Immelt set a new target to cut the assets that will be held by GE Capital at the end of 2014 to less than half their size in the run-up to the 2008 financial crisis.
“We think the timing is good to be thinking strategically,” Immelt said during an annual Electrical Products Group conference in Florida. “We think there’s a lot of techniques to do it.”
GE has been selling off real-estate businesses, insurance operations and overseas banking stakes for several years to lessen its reliance on a finance business that has accounted for about half of the company’s earnings from continuing operations.
During the financial crisis, concerns about GE Capital torpedoed GE’s stock price, cost the company its top-level, triple-A credit rating and forced it to cut its dividend.
One of the criteria of Immelt’s current pay package is to increase industrial earnings and their share of total profit. That can be achieved both by improving and growing the industrial operations as well as shrinking GE Capital’s business—a stated company goal. Immelt aims to get industrial profits up to 70% of the company’s total, up from 54% last year.
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GE Capital, Commercial Distribution Finance (CDF), announced its participation in this year’s North American Trailer Dealers Association (NATDA) annual trade show and convention, which will be held Sept. 6-8 in St. Louis.
“CDF has been supporting the trailer industry for more than 25 years,” David Wilson, commercial leader of CDF’s Diversified Products Group, said in a press release. “Today, we provide financing programs to nearly 80 manufacturers in the U.S. and Canada. Our long history in the industry, our dedicated experts and our world-class business intelligence tools demonstrate our commitment.”
GE Capital will be manning booth #816 at the America’s Convention Center in downtown St. Louis.
NATDA president Andrew Ackerman noted that an estimated $9 million in orders were written at the 2011 show. With nearly double last year’s number of manufacturers participating this year and more than double the number of dealers expected to attend, NATDA is projecting sales during the show will top $18 million.
“We’ve successfully developed this annual event into a buying show,” Ackerman said. “With specials being offered by almost every exhibiting company, dealers have incredible buying options. Cash discounts, freight allowances and free floorplan programs have made St. Louis the place to be in 2012. And for those who aren’t ready to buy, it’s a great way to see next year’s models.”
The show caters to all segments of the trailer industry, including utility, living quarter, horse, cargo, race car, marine, dump, flatbed, recreational vehicle and toy hauler markets. Attendance is free for all trailer dealers as well as dealers in related industries.
Dealers can register by visiting www.natdatradeshow.com.
GE Capital, Commercial Distribution Finance (CDF), has released its outlook for the Canadian recreational vehicle industry.
According to a press release, CDF provides inventory financing that allows dealers to stock, market and sell products from manufacturers. As a result of its longstanding position as a leading financing provider to Canadian manufacturers and distributors and their dealers, CDF “periodically provides market intelligence that may help companies throughout the supply chains to manage their businesses.”
CDF said the outlook for the Canadian RV industry is positive in light of solid overall unit sales, respectable inventory turns and the continuing strength of the national economy.
“There has been a positive increase in orders by Canadian RV dealers,” said Howard Shiebler, president and CEO of CDF in Canada. “Another encouraging and related health barometer for the industry is that the national level of dealer inventory aged over one year is just 16%.”
CDF has released an audiocast, titled “Performance of the RV Industry in Canada,” that features a discussion between CDF’s Shiebler and Garth Bromley, chairman of the Recreational Vehicle Dealers Association (RVDA) of Canada. They discuss the optimistic outlook for the RV industry and factors impacting the market, including the health of the Canadian economy, regulatory issues and RV imports. To listen, visit CDF’s Facebook page here: https://www.facebook.com/GECDF.
GE Capital, Commercial Distribution Finance (CDF) today (June 14) announced significant upgrades to its online inventory finance management tool used by dealers across a wide range of industries, including recreational vehicle, marine, motorsports, technology, and lawn and garden.
In addition, in most of these industries dealers will now have access to CDF’s industry-leading data analysis, Analytics Online, according to a news release.
Known as COMS (Customer Online Management System), CDF’s upgraded online tool is being rolled out to more than 45,000 users at dealers across the U.S., Canada and Asia. CDF said that users will process transactions more simply and access detailed metrics and real-time reports to make more informed decisions. Visit CDF’s Facebook page at http://www.facebook.com/GECDF to watch a video about COMS.
“Our dealer community will benefit from these upgrades by getting information they need to run their businesses more quickly and easily,” said Anuj Gaur, CDF’s chief information officer. “We’ve provided a robust tool that’s simple to use, allowing them to spend less time on administrative tasks and more time with their customers.”
With Analytics Online, a user can view outstandings and wholesale finance volume over a rolling 12-month period, across multiple manufacturers and distributors, and across selling seasons. CDF said that with these insights, the user can gain a better understanding of product demand based on previous seasons and order their optimal level of inventory.
General Electric’s finance unit is expanding lending to small and midsize businesses as confidence in U.S. economic strength grows.
Bloomberg reported that GE Capital said it increased proposals to U.S. commercial lending and leasing customers by 16% in the first quarter from a year ago. Earnings before interest, taxes, depreciation and amortization grew by 10% at companies to which GE Capital lends, Dan Henson, CEO of GE Capital, Americas, said in a telephone interview.
Small and midsize companies are becoming more optimistic about the outlook for their businesses, with 67% forecasting revenue growth this year and 74% expecting to hire additional workers, according to a GE Capital survey of 495 chief financial officers at companies with annual sales of $50 million to $1 billion. Ninety-four percent of the CFOs said the U.S. economy will grow or remain stable in 2012.
“Our customer base continues to become more profitable, which supports the view of these CFOs that we’re on more stable footing,” Henson, who oversees commercial lending and leasing in North America, said in an interview.
“More and more they see a growing environment,” he added.
Credit availability has improved for companies in the survey, with only 7% saying access to funds has decreased over the past year. That’s compared with 24% in the first quarter of 2010, when GE Capital first conducted the poll.
GE Capital’s North American commercial loans and lease volume grew 15% last year to $106.8 billion. Worldwide, the unit’s $45.7 billion of revenue last year accounted for 32% of GE’s $142.2 billion in total sales.
The company is scheduled to report first-quarter results on April 20.
National RV Communities LLC (NRVC) is seeking to finance an aggressive acquisition plan by tapping the private equity market for up to $400 million in new capital.
Woodall’s Campground Management reported that Scottsdale, Ariz.-based NRVC, doing business as Carefree RV Resorts, has held informal talks this spring with potential investors and has scheduled four formal sessions this week in New York City.
“It’s an exciting time. The initial response we have been getting is phenomenal,” said David A. Napp, NRVC chairman and CEO.
The new capital would help NRVC go forward with its plan to double in size within the next five years.
Founded in 2005, NRVC is the nation’s 10th largest owner/operator of destination RV and manufactured housing (MH) communities in the U.S. and Canada with 58 communities containing more than 13,300 sites. Of the 58 properties, 46 are located in Florida. Other properties are located in Texas (4), New Jersey (3) and one each in California, Ontario, Massachusetts, Arizona and North Carolina.
Napp told Woodall’s Campground Management that his company has its eye on a number of prime parks across the U.S.
“I have a priority list,” he said. “Once the capital needed is secured, I’ll be paying some people some visits. A good number are in Florida; some are in California and Arizona. The Eastern Seaboard also represents some great opportunities, like Myrtle Beach, Cape May and Cape Cod.” He was not more specific about locations of prospective acquisitions.
“A real driving force is being on or close to water,” he added.
Historically, the company has sought properties in key destination vacation markets that have a proven history of attracting both leisure travelers and retirees seeking warm weather.
NRVC wholly owns 47 of its RV and MH communities and owns a 20% interest in the remaining 11 MH properties, pursuant to a joint venture with GE Capital (National Home Communities or NHC).
The 47 RV and MH properties total 11,500 sites with a gross market value of approximately $380 million, according to an executive summary of the NRVC operations. The 2012 budgeted net operating income is approximately $26 million, including new acquisitions.
According to Woodall’s Campground Management, NHC owns and operates 11 MH properties located in Florida totaling 1,800 MH sites with a gross fair market value of approximately $83 million. The 2012 budgeted net operating income of these 11 MH properties is approximately $5.2 million.
Napp projects 2012 revenues from all 58 properties to reach $56 million and operating expenses to total $24.7 million, yielding net income of $31.2 million.
He places the fair market value of the combined properties at $462 million.
NRVC is owned by its management team and Almanac Realty Investors, formerly known as Rothschild Realty Inc., a New York City-based real estate investment adviser to public and private institutional pension plans, endowments and foundations. Almanac has invested $115 million in the company since 2005.
GE Capital has provided some $190 million during its long-term relationship with NRVC, Napp added.
Napp said he and founding partner Colleen Edwards are excited about their future in the RV and MH business.
“If the first quarter is any indication, we are seeing stabilization if not a slight upswing in our business,” he said. “I think the opportunities are good out there. We have done well in the recession. We are lining up all the elements for our next level of growth. Over the last 18 months we have analyzed our business internally and decided what we need to do to double our size over the next three to four years.”
In a somewhat related development, Napp noted that Carefree RV Resorts recently partnered with Resort Data Processing Inc., which will provide property management software and reservation software.
Carefree’s principals have a 17-year track record in the destination RV resort and MH industries. They have:
• Acquired and operated 106 RV and MH properties comprising over 30,000 sites.
• Raised over $250 million in private equity and borrowed approximately $880 million in mortgage debt for acquisition financing and refinancing.
• Become one of the first groups to bring institutional capital into the RV resort sector.
• Launched three national destination RV resort brands (Encore, Sunburst and Carefree).
• Operated two park model and manufactured home sales companies with over 2,500 new and pre-owned homes sold since 1996.
GE Capital, Commercial Distribution Finance (CDF), today (Nov. 7) announced upgrades to the Customer Online Management System (COMS), its proprietary inventory management tool.
According to a press release, the newest version provides manufacturers with their most-requested enhancements. “These new capabilities make it easier and faster for them to manage the inventory financing programs with their dealer networks,” the release stated.
“We know that our customers see COMS as the centerpiece of their inventory management systems,” said Jeff Malehorn, president and CEO of CDF and GE company officer. “That’s why we took their input to heart. The result is a significantly upgraded version of COMS with nearly 60% more features.”
A business of GE Capital, Americas, CDF provides financing that allows dealers in the U.S. and Canada to stock inventory from a wide variety of manufacturers and distributors of consumer durables such as technology and outdoor power products, electronics and appliances, recreational vehicles, boats and motorsports.
Manufacturers can now choose to receive alerts via COMS about key account developments. For example, they can be notified when their dealers are approved for funding, which helps keep the supply chain moving. They can also personalize COMS according to their own needs by choosing the most important information for display.
In addition to transactional information, COMS offers analytical insights by making CDF’s business intelligence tools available in one place. Manufacturers can target sales opportunities and assess risk in their dealer networks using these tools. By analyzing real-time information, manufacturers can examine trends related to dealer performance, including receivable outstandings, credit line utilization and repayments. In addition to assessing the financial health of dealers, manufacturers can gauge the popularity and turn-over rates of various models.
Other new features include:
• Expanded billing capabilities, including online one-click payments and electronic billing statements that can be downloaded.
• Enhanced search capabilities.
• Modern design that enables easier and faster navigation.
• Self-service administration that allows customers to update access locally.
GE Capital, Commercial Distribution Finance (CDF) has selected RV|ID to enhance its floorplan collateral management services for recreational vehicles.
According to a press release, the global positioning system-based (GPS) service will increase the ease and speed of doing business for both manufactures and dealers by providing real-time mapping, reports and alerts on RV assets in the U.S.
“This is an innovative service that can be used industrywide to efficiently and effectively monitor inventory,” said Pete Lannon, managing director for CDF’s RV business. “GE Capital is pleased to introduce new technologies like RV|ID to our customers — one more way we’re providing them with value beyond money.”
Developed by Red Lantern Labs of Solana Beach, Calif., the system provides RV makers with real-time logistics information as the assets move from factory to dealer to enable the monitoring of retail-level inventory and shelf space. For dealers — especially those with rental businesses — RV|ID provides mileage and usage information to allow them to better service and maintain their fleets. Similarly, CDF will be better able to track assets prior to retail sale.
“We’re pleased to be able to provide this important new tool to GE Capital,” said Jon Corn, president of sales and business development for Red Lantern Labs. “Using RV|ID, a manufacturer can improve production logistics and increase customer satisfaction while dramatically reducing its lemon law exposure; and a dealer can use RV|ID to improve inventory management. It’s a true win-win situation.”
Editor’s Note: The following story was written by Bob Sechler and was published by The Wall Street Journal.
GE Capital nearly sank General Electric Co. during the financial crisis. The unit faces an uncertain regulatory future and has almost nothing to do with the conglomerate’s other businesses. And Chief Executive Jeff Immelt is standing by the business.
Mr. Immelt acknowledges that he let the lending operation grow too large, calling that lapse the biggest regret of his 10 years as CEO. He also says many investors, including some big ones, would rather the company get rid of the operation.
But he believes GE can make lots of money from a safer GE Capital, focused on business loans to midsize companies, and he’s willing to let the unit account for as much as 40% of GE’s profit. That disagreement, he says, is the main factor holding back GE’s stock.
“I think it is rediscovering with investors the value of financial services,” Mr. Immelt says when asked what it will take to get the company’s share price rising again. “We obviously think it is worth more than they do right now. I think that is only going to come with time.”
GE Capital, which accounted for about a third of the parent company’s revenue last year, is a significant lender in its own right. The unit’s $606 billion in assets make it bigger than all but seven U.S. banks, and it dwarfs the lending arms at other industrial companies, such as Caterpillar Inc., whose financial-services unit has $30 billion in assets.
GE Capital relies on the financial markets rather than deposits to fund its loans. When that funding started to dry up during the financial crisis, GE lost its triple-A credit rating, saw its stock fall below $6 and had to slash its dividend.
The finance unit now is on significantly firmer, longer-term footing—thanks in part to paring back its reliance on short-term borrowing—and problem loans have been contained. But in a sign the crisis isn’t fully in the past, the U.S. regulator for mortgage giants Fannie Mae and Freddie Mac sued GE and 16 other big lenders Friday aiming to recoup billions of dollars in losses on soured mortgage loans.
“There’s a negative attitude toward financial stocks,” says Eric Boyce, a fund manager at Hester Capital Management in Austin, Texas, which owns GE stock. “That’s an anchor.”
While many industrial companies have set up so-called captive-finance units to help customers buy the companies’ goods and services, GE jumped into lending for its own sake. Less than 5% of GE Capital’s loans are made to help companies buy the conglomerate’s products. The unit puts the bulk of its effort into areas that include consumer finance, aircraft leasing and lending to midsize businesses.
The unit has been downsizing and sharpening its focus since the financial crisis. It has stepped back from real estate, where GE Capital had been among the world’s largest property investors, and sold off consumer-finance operations in the emerging markets of eastern Europe and Latin America. A key sign of progress should come next year, Mr. Immelt says, when he expects GE Capital to resume paying a dividend to GE proper.
Now GE has to convince investors that it has the finance unit under control and that the investment is worthwhile, Chief Financial Officer Keith Sherin says.
GE also has to navigate a new regulatory framework. Oversight of GE Capital in July shifted to the Federal Reserve, which is expected to be more demanding than the unit’s previous regulator, the Office of Thrift Supervision, which was dissolved in the wake of the financial crisis.
“We have weathered the storm as well as anybody and we are well positioned to come out the other side,” Mr. Immelt says. “Investors are going to have to triangulate what they think that set of financial-service earnings are worth.”
EDITOR’S NOTE: The following is an article authored by Caroline Steele, Growth & Innovation Leader, GE Capital, Americas, and Jeff Malehorn, president and CEO of GE Capital, Commercial Distribution Finance, on innovation in today’s retail marketplace.
To most dealers, innovation means having fresh new products to stock in their showrooms. But innovation can also occur by serving customers better, enhancing their experience and bringing them new value. Retailers of everything from appliances to lawn and garden equipment to recreational vehicles have boosted revenues using practical and relatively inexpensive ideas that can be as powerful as new product introductions.
The Innovation Investigation
Broadly, innovation is the development of new ideas but it can also be defined as the process of applying current thinking in fundamentally different ways, resulting in significant change. Apple’s Genius Bar and Best Buy’s Geek Squad are prime examples of the creativity retailers are capable of when they look at their operations with fresh eyes.
Retailers can look for innovation opportunities throughout the value chain but customer interaction may be the most obvious place to start. Define the customer experience as a journey with three stages, each of which offers innovation opportunities. Awareness is when the customer first learns about a product, service or brand. Commitment is when the customer chooses to buy it. Usage is the actual use of the good or service over time.
A company might ask: What is the current customer experience with our product in the awareness stage? Perhaps raising awareness involves direct mail, event participation, advertising, cold calling, or social media. Next ask: What are the customers’ frustrations with this experience? Maybe your company doesn’t have an efficient way to route incoming calls so consumers can reach a human quickly; maybe they receive too many pieces of direct mail; maybe sales reps call at inconvenient times.
Probing further, a company exploring the awareness stage might ask: How do customers want to learn about our product or service? It’s possible that consumers want a single point of contact to call with questions. With this groundwork complete, the company can finally ask: How can we fulfill that desire? In this case, the solution might involve building a web page with the local representatives’ contact information. Or maybe the phone system can be re-programmed to route calls according to consumers’ zip codes.
Non-product innovation can take many forms but there are three areas that dealers can tackle easily and relatively inexpensively: Marketing and selling through the Internet; promoting a lifestyle/mood around a particular product or brand; and aligning with affinity groups.
Non-Product Innovation #1: Selling over the Internet
The Internet is how many customers want to learn about products and services. One RV dealer who embraced Internet sales grew revenues from a few million to $100 million in just seven years. He turns over his inventory at more than twice the industry average and has increased his credit line more than ten-fold during that time period.
This kind of success requires more than simply building a Web site. It requires analyzing the entire shopping experience both in-store and online. This particular RV dealer has a team of sales people dedicated solely to handling questions and orders coming in over the Web. The dealer also pays for various search engine optimization techniques that return its listing in relevant Internet search results.
Retailers that don’t want to go to the expense of enhancing their own Web sites are selling their wares on high-traffic Web sites such as eBay and Craigslist, which are proving to be an efficient way to move older or difficult-to-sell merchandise.
Non-product innovation #2: Promote the lifestyle
The RV industry fully embraces the concept of experiential marketing with mock campsites in-store so potential customers can absorb the experience. RV dealers also understand the importance of extending their promotional activities beyond the showroom. Participating in events such as home and garden shows generates buzz around their lifestyle and run rallies create a clubby atmosphere. Some RV and marine dealers even establish relationships with specific campsites and marinas to give customers preferred access to hot spots.
Non-product innovation #3: Find affinity groups
Instead of marketing directly to a target audience, dealers can build relationships with those who might influence their targeted consumers. For instance, one Texas-based dealer of luxury appliances invites local real estate agents to cooking demonstrations in its showroom so he can highlight his products to those who might provide input to new homeowners planning kitchen remodeling projects. These agents are likely to be friendly with area contractors too – another affinity group.
A long-time appliance dealer in Montana launched a store that sells the newest electronics such as Apple computers and iPads. By appealing to a young, technologically savvy demographic, and by subtly promoting its nearby appliance store brand, the company hopes to cultivate a new generation of appliance consumers.
On the Internet front, consumer brands such as Victoria’s Secret and The Gap and retailers such as Sears are realizing the benefits of building relationships via social media, especially Facebook and Twitter. Creating a digital community of local enthusiasts for your products may attract younger generations. To encourage online interaction, some retailers offer a small prize or a limited-time-offer discount.
Ultimately, doing business in the 21st century means new players and new rules. Dealers have realized they can’t rely solely on manufacturers to deliver innovation in the form of new products. To create a true strategic advantage, they must continually pursue innovation in their own showrooms.