BOSTON (Reuters) - General Electric Co (GE.N) said on Monday it would stop offering loans for the purchase of consumer boats and motorhomes, in another blow to the hard-hit recreational products sector.
The second-largest U.S. company by market capitalization told boat and recreational-vehicle dealers that it would cease taking applications by July and cease underwriting new loans on Aug. 1, said Cristy Williams, a spokeswoman for GE Money, the company’s consumer finance arm. It 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,” said Williams.
When GE stunned Wall Street with an unexpected drop in quarterly profit -- largely due to difficulties at its financing arms -- GE officials said they aimed to cut back GE’s 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 Irvine, California, and St. Paul, Minnesota, offices as a result of the step. The Fairfield, Connecticut-based company will continue to provide consumer loans for some boat engines and related products, as well as providing commercial credit to the boat industry.
Makers of boats and motorhomes have had a rough year as rising gas prices, a tough housing market and fears of a U.S. recession cause many consumers to scrap plans to buy big-ticket recreational items.
Shares of Brunswick Corp (BC.N), the world’s largest maker of recreational boats, No. 1 motorhome maker Winnebago Industries Inc (WGO.N) and No. 1 U.S. boat retailer MarineMax Inc (HZO.N) are all down so far 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, wrote R.W. Baird analyst Craig Kennison in a note to clients.
Reporting by Scott Malone