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