GE increases rates on dealers

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GE’s Commercial Distribution Finance business has notified marine dealers that it is increasing rates, and the changes could have a significant impact on the industry, according to Phil Keeter, president of the Marine Retailers Association of America.

Keeter said the rate increases are substantial and that many dealers may have difficulty meeting the new conditions.

Citing difficult times in the industry, including “unhealthy” levels of aged inventory, GE says the changes are necessary to provide the “level of service and liquidity the industry requires,” according to a letter from Bruce Van Wagoner, president of GE Capital Solutions’ Marine Group. The letter, dated Feb. 25, was obtained this morning by Soundings Trade Only.

“Over the last several months, several marine wholesale and retail financing sources have exited the industry, retail boat registration numbers have fallen off dramatically, and many marine manufacturers have idled and/or rationalized their production,” Van Wagoner said.

“We at GE’s Commercial Distribution Finance business are not immune to the challenges in our industry,” he added.

Late last year, Textron announced it was exiting floorplan financing for marine dealers, leaving GE as the major player in the market.

“My first thought is I’m glad that they’re taking the time to do something to manage their risk to stay in the floorplan business,” said Jim Coburn, president of the National Marine Bankers Association, upon hearing the news.

Keeter says the new conditions as outlined in the letter will be difficult for some dealers to meet.

“It’s a demand letter from GE asking dealers to do certain things, and if they don’t do those certain things then they will become in default of their arrangement with GE,” Keeter said. “What they’re proposing in the letter for the dealer to have to do is very stringent and almost an impossibility for most dealers at this point in time.”

The “pricing action will apply retroactively to all of your outstanding existing invoices as of April 1, 2009, in addition to all new invoices financed by CDF on or after April 1, 2009,” according to the letter.

Keeter said the MRAA is telling its members to respond immediately to the letter and tell them it’s unacceptable. If they don’t, it signifies compliance with the terms, he said.

GE, Keeter noted, has always been supportive of the marine industry, and he believes this may be driven by GE’s corporate office, which he says doesn’t have the same “care and concern” about the boating business.

“It’s a reality, but, yes, it comes as a surprise to me,” Keeter said. “With GE’s stock falling so far, I think corporate is trying to rein in some of this out there. I just can’t believe GE wants to be the biggest boat dealer in the world, and if all of this happens, they very well could be.”

— Beth Rosenberg
b.rosenberg@tradeonlytoday.com

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Comments

3 comments on “GE increases rates on dealers

  1. Lisa Ahollinger - George

    As the Volvo Penta Power Center for N-CA, UT, NV and HI we are watching with concern the development of this situation. By making it basically unaffordable for the average dealer, GE’s decision looks more like an “elegant” way out of the Marine Finance business.
    WILL SUCH AN ACTION HELP GE at the end? WE DOUBT IT – as Keeter states, they probably dont want to end up becoming the worlds largest boat dealer.
    WHO IT WILL HURT – is the overall industry and the dealers who are hurting already but are working hard to help the industry survive.
    We hope GE Corporate will reconsider and “think forward” instead of locking down!

  2. K Elmore

    I am a small dealer, we’ve already laid off, trying to work with a skeleton staff, cut our profit margins, and now GE wants more money. It’s getting harder and harder to hang on. It’s a funny thing to me that years ago, when I sent curtailment payments to them, they didn’t want them. Now they want them when we’re going through the worst time in the history of the marine business. There will be very few left standing when all this is over.

  3. Dee

    We are a small dealer also, have laid off and cut every angle to keep the business up and going. We are taking very small profits and in some cases no profit at all to reduce the floor plan. When times are so tough GE seems to demand more. Not only are we dealers struggling with small profits if we can close a sale, but we are also dealing with the credit crunch crisis in trying to get deals financed. Why not let the extra interest go toward the curtailments rather than “extra money” to GE that isn’t helping us reduce the floored amounts at all. If things don’t change and GE don’t come to terms and work with the dealers, GE is going to own a lot of inventory and I am not sure there will be manufactures there to buy the inventory back!! so they may end up as the biggest boat dealer, even if they don’t want to be!! I feel with GE’s current move they are only opening the door so they can exit the marine financing business… and as they go they are forcing all the dealers out of the business also. Just like the presidental election stated a recession is not the time to raise taxes and the same goes for GE, now isn’t the time to raise the interest rates and put such demands on everyone.

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