Corporate giant General Electric has stepped up and taken a major place in powersports financing activities with the purchase of several consumer assets from bankrupt Conseco Finance Corp. The purchase was made by GE Consumer Finance, and the portfolio of Conseco’s sales finance, consumer finance and private label credit card business will be managed by GE Retail Sales Finance, a unit of GE Consumer Finance. The purchase was completed in June.
The acquisition adds $2.4 billion in receivables and about 1.7 million new consumers to the GE Retail Sales Finance business.
GE Consumer Finance has about $80 billion in assets, and is a leading provider of credit services to consumers, retailers and auto dealers. It offers a range of financial products, including private label credit cards, personal loans, and bank cards among other financing products and services.
GE has about 40% of the consumer retail market in the powersports industry, in second place behind Household Finance.
In a related move last September, GE’s commercial arm acquired most of the Deutsche Financial Service business. Deutsche Financial provides commercial inventory financing for more than 1,000 manufacturers and nearly 14,000 dealers in several industries, including powersports.
growing the retail business
“We’re getting more focused on this industry,” says Dave Fasoli, president of GE’s Retailer Sales Finance Servicing Company, during a recent interview with Powersports Business. Fasoli’s unit is primarily focused on big ticket retail consumer items, as opposed to revolving consumer finance. Fasoli’s definition of “big ticket” is purchases in the $1,500 to $25,000 and higher category. The average ticket for his unit is about $1,500, but it’s higher in powersports, about $5,600.
“As we looked at Conseco,” says Fasoli, “we saw a real opportunity to move ahead; a way to buy our way into a great home improvement business and plenty of other names that fit nicely into our retail business. This was a growth play, and we’re rocking and rolling on some new deals.”
Fasoli said GE is integrating the commercial operations acquired from Deutsche and Conseco’s retail operations as well as relationships with most OEMs, including Yamaha and Suzuki.
On the commercial side, he says, GE has been offering extended warranty programs and inventory financing. The Deutsche acquisition helped GE get into the inventory financing business “in a big way,” a new powersports business for the company.
“Dealers can make a lot of money in warranties and finance,” says Fasoli, “and we play in all three areas now.”
GE is “working behind the scenes” to put together a bundled approach for these services, says Fasoli.
Although GE has been involved with powersports for more than a decade, most notably with Suzuki, it was only about two years ago that the company decided powersports was an area of opportunity. “We looked very hard at the industry,” says Fasoli, “especially from the installment-based programs and revolving credit programs.”
Fasoli says GE sees the commercial side as basically a two-horse race between GE and Transamerica.
In the $11 billion retail business, it’s GE and Household Financial Services (HFSI), with HFSI providing services to Yamaha, Kawasaki and Polaris. Harley-Davidson and Honda operate their own financing businesses inhouse.
new program in 2004
GE is putting together an integrated program for the powersports industry that it expects to introduce next year, according to Fasoli. The program will emphasize improved processing capabilities and stronger point-of-purchase sales efforts.
“We’re concentrating on our point-of-sale (activities) with some great POP for our revolving credit programs,” he said.
“The closed end (installment lending) tends to be a more complicated paper process, and we’re trying to automate this. We want to be able to say (money will be available) two to three days after we receive paper.
“Dealers are getting money in 48 hours on revolving side, and we know cash flow is important and so is simplification at the point-of-sale.”
GE is seeing two installment financing trends by dealers: One is pushing the term out to 60 months and more in order to get the owner demo age down by providing lower monthly payments to younger consumers.
However, some dealers like to see consumers set up with a much shorter term, often only 24 or 26 months, so they quickly build up equity in the machine that can be used on the purchase of a new model.
“Dealers are finding they can give away the bike and still make money on financing and warranty,” says Fasoli. “And the OEMs are watching car dealers closely to see what they are doing.” Some powersports OEMs, such as Honda and Suzuki, are also auto manufacturers so they know exactly what works and what doesn’t on machine financing.
OEMs are seeing that financing offers in powersports generate excitement, just as they do on the auto side, and they are generating sales to those who are aggressive, according to Fasoli.
“Some of these guys are being successful by repositioning marketing dollars by focusing on financing,” he says.
By focusing on financing, and OEM can steer consumers toward specific models, depending upon inventory and margins.
Other Future steps
GE’s integration of services it’s gained through acquisitions soon will enable the company to present a single face to the powersports industry.
“There needs to be someone who can get in there, who can deal with the entire industry,” says Fasoli. “We haven’t done that in powersports, but we’re getting there, just as we have done in auto.”
Expect GE to be much more proactive with a broad range of OEMs and with dealers. “As a new dealer becomes active with an OEM,” says Fasoli, “they can expect a call from us.
“And with the OEMs who we don’t have a relationship with, we’ll be calling on them.”
“GE financing activities are growing and outpacing the industry,” says Fasoli, “because the OEMs are getting more aggressive, dealers are becoming more aware of the benefits of selling financial services, and GE is adding enhancements that are easier to use.
Copyright 2003 Powersports Business