April 20, 2015 1:45 AM, EDT

GE to Sell Financial Units, Plans to Exit Trucking

By Michael G. Malloy, Staff Reporter

This story appears in the April 20 print edition of Transport Topics.

General Electric Co. said it will sell most of its GE Capital assets in the next two years, effectively securing the company’s exit from the trucking industry.

GE Capital Transportation Finance, based in Irving, Texas, is one of the largest companies financing the commercial trucking industry’s equipment purchases. GE Capital Fleet Services, based in Eden Prairie, Minnesota, provides fleet management and consulting services to a variety of commercial fleets.

“We anticipate being able to sell our business to buyers who are fully committed to and invested in the financial services industry and can offer a good environment for growth,” a GE spokesman said.

The company doesn’t disclose dollar figures, but it does business with more than 25,000 customers, Dan Clark, president of GE Capital Transportation Finance, told Transport Topics. “The predominant amount of dollars is on the truck side” in GE’s financing, with the rest in trailers.

He added: “From an equipment sales standpoint, 2015 will probably be the peak of this cycle. I’m looking out two years and feeling pretty good about it becoming more normalized at the tail end of this cycle.”

The transportation equipment sector for trucks, trailers and buses totaled about $117.4 billion in 2013, according to the Commerce Department’s Bureau of Economic Analysis.

The Equipment Leasing and Financing Association estimates that about 58% of truck and trailer purchases are financed, said Bill Choi, ELFA’s vice president of research and industry services.

Based on those figures, “it’s over a $60 billion industry for financing,” Choi told TT.

GE Capital’s modern-day predecessor transport business has been around for 40 years, and Clark said its customers have been very supportive, namely because they’ve seen the business go through revamping before.

In 2012, GE Capital sold the last 27,000 trailers of its Transport International Pool business unit after leaving the trailer-leasing market.

And in 2010, GE exited the trailer-tracking business, selling its Asset Intelligence unit to I.D. Systems Inc. for $15 million.

The finance unit now has more than 200 employees, and the average tenure of its 100-plus sales reps is 15 years, while sales managers average more than 25 years of experience, Clark said.

“That’s what they’re going to buy,” he said. “The value in the franchise is the people and the organization; they know how to talk the language of the industry.”

“GE has always been a huge player in truck, trailer and fleet financing,” said Keith Tuttle, president of Motor Carrier Service in Northwood, Ohio, and chairman of the Truckload Carriers Association. “They’re one of the last remaining noncaptive finance companies, so this brings another whole dynamic. They’ve been a valued supplier to the industry, and a lot of us have used GE Capital in the past.”

Terry Thornton, chief financial officer of KLLM Transport Services, said he expects GE’s employees to “go to where the business is ultimately sold and will do the same thing they’ve always done.”

In 2010, GE Capital became the lead lender supporting the purchase of International brand trucks when Navistar International Corp.’s in-house finance withdrew from retail purchases to focus on wholesale support for its International dealerships.

“GE Capital has been a great partner for us but also very important to the entire industry, as our program only represents about a third of their transportation assets,” said Bill McMenamin, president of Navistar Financial Corp.

“We look forward to working with GE Capital in their process to make sure our vendor program ends up with a great partner,” McMenamin told TT, noting that all agreements will remain in place.

Others contacted by TT declined comment, including Daimler Truck Financial and Toronto-based Element Financial Corp., which bought PHH Arval’s North American fleet management business last year for $1.4 billion.

GE Capital’s transportation finance roots date to 1917 with The Associates Corp., which eventually was bought by Citigroup in 2000. GE Capital acquired the transportation finance business from Citigroup in 2005 for $4.4 billion.

GE’s transportation business is a founding member of the Allied Committee for the Trucking Industry, whose chairman is John Conkin, GE Capital Transportation Finance’s vice president of sales.

Conkin “will be in that same position in the new [company] as we get sold,” Clark said.