Last Friday GE announced that they were selling most of GE Capital. As a GE shareholder (I had one of those well timed “feelings,” combined with some research reports that made the stock look promising and I bought more GE shares last Monday to add to those that I already owned) I read whatever I could on the divesture, so when GE says most it is effectively all of GE Capital sans the financing of what they sell, like power plants and railroad engines. It’s hard to put a spin on the divesture that doesn’t include GE selling their equipment-financing arm. In the Saturday, April 11, Wall Street Journal article “Bounty of Assets Up for Grabs” the following sentence appeared:
GE also may consider separately selling smaller parts of that business—for example, ones specializing in making loans to purchase equipment—to business-financing firms like CIT Group Inc. and Ally Financial Inc.
Although the WSJ broke out the equipment financing as an example it would clearly be easier for GE to sell larger chunks of their business and there are clearly other possible buyers then the two finance companies mentioned.
GE is a major finance company to the “copier industry” and, provided I am reading all of the articles correctly, their exit from the business could have significant affect going forward. GE could sell a large chunk of GE Capital that includes the equipment leasing business to a bank or non-bank entity that may not want the actual equipment-leasing portion. That could result in a transition from GE to a new vendor with another quick transition to a vendor who ends up actually owning the equipment-leasing portfolio. Or maybe that finance company that buys the larger piece just “runs off” the equipment-leasing portfolio if they cannot find a buyer at a price that makes sense?
Certainly large banks like US Bank have the ability to buy the leasing finance business but who’s to say that they, or Wells Fargo or CIT, want to increase their portfolio in this space by the size of GE’s portfolio. It may create too much concentration in a single business line. That’s conjecture, and any of these vendors may be chomping at the bit to get the portfolio, but at this point nobody knows.
But one thing that seems sure is that the industry is going to lose a major vendor and less competition usually means higher prices. You add the fact that interest rates are bound to increase this year, and more than likely next year as well as the Fed usually takes a measured approach when changing rates, with the loss of a larger competitor and it seems like our “cost of money” will be increasing over the next few years. If that happens, the payment will increase to the customer. How will that affect your business? How are you going to start to plan for that in today’s sales efforts?
