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GE won't finance boat, RV buys

May 06, 2008|From Reuters

General Electric Co. said Monday it would stop offering loans for the purchase of consumer boats and motor homes.

The company told boat and recreational-vehicle dealers that it would cease taking applications by July and underwriting new loans Aug. 1, said Cristy Williams, a spokeswoman for GE Money, the company's consumer finance arm.

The company will continue to service its $3.6-billion loan portfolio.

"We just really looked at a lot of different alternatives and are facing a challenging environment and ultimately came to the decision that we needed to invest our resources and capital in areas where we could see good return," Williams said.

When GE stunned Wall Street with an unexpected drop in quarterly profit -- largely the result of difficulties at its financing arms -- GE officials said they aimed to reduce exposure to the most volatile segments of the finance industry.

GE has also put its U.S. private label credit card and Japanese consumer lending units on the block. GE's overall U.S. retail sales finance portfolio comes to about $20 billion.

Williams said GE would be laying off "less than 100" people at its offices in St. Paul, Minn., and Irvine as a result of the step.

The Fairfield, Conn.-based company will continue to provide consumer loans for some boat engines and related products, as well as commercial credit to the boat industry.

The decision was a blow to the already hard-hit recreational products sector. Makers of boats and motor homes have had a rough year as rising gas prices, a tough housing market and fears of a U.S. recession caused many consumers to scrap plans to buy big-ticket recreational items.

The shares of Brunswick Corp., the world's largest maker of recreational boats, No. 1 motor home maker Winnebago Industries Inc. and leading U.S. boat retailer MarineMax Inc. are all down this year.

"The decision is another in a string of developments -- diminishing home values, higher gas prices, weaker consumer confidence -- that has 2008 on pace to be the worst year since 1992" for RV and boat makers, Robert W. Baird analyst Craig Kennison wrote in a note to clients.

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