Friday, March 25, 2011

GE makes front page of NY TImes

I started my day off by reading this great article on General Electric. 

Simply put they get money back every year and pay no taxes. Why does this not surprise me.

Many of us both in the distributor / importer and retail side refer to them as "Gets Everything" because if you ever finance your Powersports Business with them and find yourself in a problem like the 300 or so plus stores I dealt with between 2008-2010 they are likely to take your ILOC letter of credit, house, RV, and anything else you have of value if you find yourself in a bad position.

They also quite recently shut down the 6 remaining Super Scooter Stores of America that were trying to re-structure. Yes, they have that much power. Part of the blame does lie with scooter shops that sell out of trust, buy too much inventory, decide to get expensive motorcycles that have no turnover, but the reality is that the system is set up so the only winner is the bank. Factory gives them a discount for factory financing, Distributor pays the flooring for the dealer to GE, then the dealer pays flooring to GE on the bike etc... At one point their fun financing was having fun driving the scooter craze financing a good portion of all the Vespa buyers. If you look at the numbers for every Genuine, Vespa, Kymco sold in the country these guys get a few bucks. So the motorcycle market is a big portion of what their financing arm does.

If the dealer fails the distributor / OEM buys the product back at full price no matter how old it is ( not matter how scratched or messed up it is ( yes, they keep all the discounts etc...) its not exactly a fair set up. Do they have risk? Absolutely, but the laws, taxes, and everything else is written in their favor. Then you have companies that are great distributors that are basically indentured servants to GE. Try being a distributor that had to buy back 1,000 plus bikes last year and you have yourself a company that pays interest on every new bike, every bike in the warehouse, and every bike still out there.

They also advertise and are highly influential so I upset a few bankers / editors when I told dealers don't buy more than you need. Don't bet the family farm on GE, and try to pick up distributors with in-house financing at the SEMA show last year. I don't care if the GE sales rep is in the audience because the truth is he should be saying the same things. Giving financing to everyone without a proper understanding of what it can lead to is part of the reason the Powersports Industry crashed in the first place. More than a few industry insiders asked me to tone it down, but again most of them don't get the calls from people loosing their house in Foreclosure or business because of GE. If you don't need to finance with GE, then don't. It's not worth loosing your small mom and pop scooter store for a few extra units.

Right now they are the largest RV, ski boat, and motorcycle dealer in the country thanks to all the buybacks from 2010. Thanks to them the auction companies have become a lot bigger the last few years. The used market has been great meaning MRP has benefited.

In the interest of full disclosure GE closed down some of our competitors last year as well, but that doesn't mean I like what they did. DUH WINNING is a great thing, but not the way GE has made it happen. We need to be smart about financing the dealers

Now I read this, GE pays less taxes than the average Powersports Dealer. Unbelievable.
http://www.nytimes.com/2011/03/25/business/economy/25tax.html


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