GE Will Sell Fleet Financing Units For $6.9 Billion

Reports have surfaced for some time that GE is on its way out of the banking business, including a March announcement that GE might cut its commercial lending side.

This was followed by an April announcement that GE Capital will sell off about $275 billion in assets over the next two years. Now, the reports about GE show that the company has agreed to sell off its vehicle-fleet financing businesses for $6.9 billion, The Wall Street Journal reported.

That sale would include its operations in the U.S., Mexico, Australia and New Zealand, while another deal would be made separately for its European business. The news, reported yesterday (June 29), shows another step forward in getting its hands away from the banking business. The first deal involves selling off the assets under GE Capital to Element Financial Corporation. The deals are expected to start in the third quarter, with the final being closed in the fourth.

“We are on track to execute sales of $100 billion by the end of 2015 and expect to be substantially done by the end of 2016,” Keith Sherin, CEO of GE Capital, told WSJ.

According to that same report, GE has taken the first steps to sell its European fleet unit to a French company Arval before 2015 ends. That fleet, in particular, has 160,000 vehicles across 12 countries, WSJ reported, and has a value of about $2.68 billion (€2.4 billion).

This deal means that GE Capital — which as a standalone bank would currently qualify as the seventh-largest U.S. bank — could eventually be slimmed down to an operation that would primarily finance customers of GE’s industrial operations, which include manufacturing jet engines and power turbines. Much of GE Capital’s current business consists of financing for retailers such as supermarket chains and fast food franchisees.

“GE Capital must enhance our industrial competitiveness, not detract from it,” CEO Jeff Immelt wrote in a shareholder letter that was published in March. “We see a significant advantage in our ability to bring financial solutions to industries like aviation, energy and health care. But make no mistake, the ultimate size of GE Capital will be based on competitiveness, returns and the impact of regulation on the entire company.”

One solution to that problem is to slim GE Capital down so it’s no longer big enough to qualify as a SIFI. GE has been doing that in large ways and small; for example, last year it began spinning off its private-label credit card business into a separate company called Synchrony Financial, and in February the government of Hungary said it would buy Budapest Bank from GE Capital for up to $700 million. But regulators will also have to give approval for a much faster breakup of GE Capital.

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