Issue link: https://read.dmtmag.com/i/499779
14 • May 4, 2015 • Powersports Business FINANCIAL www.PowersportsBusiness.com Commercial Distribution Finance part of company to get new home GE announced that it will create a simpler, more valuable company by reducing the size of its financial businesses through the sale of most GE Capital assets and by focusing on continued investment and growth in its world-class industrial businesses. GE and its Board of Directors have deter- mined that market conditions are favorable to pursue disposition of most GE Capital assets over the next 24 months except the financ- ing verticals that relate to GE's industrial businesses. Under the plan, the GE Capital businesses that will remain with GE will account for about $90 billion in ending net investments excluding liquidity — about $40 billion in the U.S. — with expected returns in excess of their cost of capital. "This is a major step in our strategy to focus GE around its competitive advan- tages," GE chairman and CEO Jeff Immelt said. "GE today is a premier industrial and technology company with businesses in essential infrastructure industries. These businesses are leaders in technology, the industrial Internet and advanced manufac- turing. They are well positioned in growth markets and are delivering superior cus- tomer outcomes, while achieving higher margins. They will be paired with a smaller GE Capital, whose businesses are aligned with GE's industrial growth." "The successful IPO of GE's retail finance business, Synchrony Financial, and other recent business exits have demonstrated that our financial services assets can be more valu- able to others," said GE Capital chairman and CEO Keith Sherin. "GE Capital's businesses are excellent, and this is a great market for selling financial assets. Our people are world- class. We are confident these businesses will thrive elsewhere." Under the plan, GE expects that by 2018 more than 90 percent of its earnings will be generated by its high-return industrial busi- nesses, up from 58 percent in 2014. CREATING VALUE IN GE CAPITAL GE Capital has been an important part of the history of GE. However, the business model for large, wholesale-funded financial companies has changed, making it increasingly difficult to generate acceptable returns going forward. GE will retain its vertical financing businesses — GE Capital Aviation Services, Energy Financial Services and Healthcare Equipment Finance — that directly relate to its core industrial businesses. These businesses represent roughly $200 billion in ENI (entire net income). Since 2008, GE has reduced GE Capital's ENI from $538 billion to $363 billion at the end of 2014. The separation of Synchrony Finan- cial, which is targeted by the end of 2015, and other recently announced dispositions, account for another $75 billion in ENI reduc- tion (the Synchrony separation is subject to regulatory approval). There is potential to return more than $90 billion to investors in dividends, buyback and the Synchrony exchange through 2018. The exits of the targeted GE Capital businesses should release approximately $35 billion in div- idends to GE (subject to regulatory approval), which, under GE's base plan, are expected to be allocated to buyback; this is in addition to the impact of the Synchrony exchange and ongo- ing dividends. The GE Board has authorized a new repurchase program of up to $50 billion in common stock, excluding the Synchrony exchange. GE expects to reduce its share count to 8-8.5 billion by 2018. These actions would still allow room for opportunistic "bolt on" acquisitions in GE's core markets. GE also said it plans to maintain its dividend at the current level in 2016 and grow it thereafter. "We are proud of the GE Capital team, the outstanding businesses that GE Capital employees have built, and how they have deliv- ered for customers and shareholders over many years," said Immelt. "The GE Capital team has displayed great resiliency, facing tough cycles and driving strong results." PSB GE announces plans to sell most GE Capital assets GE CAPITAL LAUNCHES DEALER INSIGHTS PORTAL GE Capital, Commercial Distribution Finance (CDF), announced it has launched Dealer Insights, an online portal designed to give motorsports dealers relevant informa- tion on inventory, demographics and financ- ing to help guide business decisions. Pulling from CDF's comprehensive data and third-party research, Dealer Insights is updated daily to provide motorsports dealers with the most pertinent information to help run their business. "Business owners require an enor- mous amount of information to run their operations, but often don't have the time or resources to sort through different chan- nels to find what they need," said Sameer Gaur, president of the motorsports group at CDF. "Dealer Insights is designed to provide actionable information at a glance to help facilitate quicker decision making." Dealer Insights provides customers in the motorsports industry with real-time data, such as: How far potential customers need to travel to reach dealers' location Current and projected consumer demo- graphics such as population and income statistics in dealer's specific territory How aged inventory compares to other CDF motorsports dealers How many and which units are com- ing off interest-free programs This informa- tion allows dealers to take action about sales and promo- tions, marketing and inventory mix. "Dealer Insights allows me to have full knowledge of where my inventory is, anywhere and any- time," said JB Bussert, general sales manager at MCC Motorcycle Center, a CDF customer in Villa Park, Ill. "The aging feature in partic- ular helps focus the sales team on units that we want to be more aggressive with selling. I look forward to using the tool more to help me with my sales and marketing." SAMEER GAUR