According to the Financial Times General Electric’s in-house virtual bank, GE Capital, has agreed to give JLR (Jaguar-Land-Rover) new financing secured by vehicles as they come off the production lines. Cash flow wise, JLR will get money almost instantly upon completion of production rather than later on down the road when the dealers and/or their banks pay for the vehicles. GE Capital says it looks forward to helping other European automakers free up working capital by borrowing against “underutilised assets”. This new kind of financing gives companies a powerful incentive to build cars for the “Sales Bank” even if no firm dealer commitments are in hand. Rut Row!
JLR has been a massive money pit for Tata so far. “Tata has pumped more than £1.2bn into JLR to cover losses since buying the businesses from Ford Motor for $2.3bn last year.” Besides the new GE money, JLR borrowed £500m from a group of banks last month and continues jawboning the EU and UK governments for mo’ money. Meanwhile, JLR has already promised to shut down at least one of its three UK factories. Ford seems to have sold at the last possible good time. Speaking of which, not much news about the prospective Volvo sale in some time, eh?
Tagged as GE Capital, High Finance, Jaguar, Land Rover, loan, Tata
Some people never learn. Fresh on the heels of the mortgage disaster we have a group literally giving Tata money for cars they build but have not sold. If the cars end up not selling for enough then Tata goes deeper in the hole. And if they go deep enough the entire deal is going to be cut off.
Amazing, GE Cap won’t finance existing products here in the U.S. since the recession, like motorcycles and ancillary loans for cars, that people will buy right now, yet they’ll bet on a Jaguar, and Land Rover pipe dream. BMW bet on Land Rover, GE should read that story.
not much news about the prospective Volvo sale in some time, eh?
Ford wants to sell, but has no incentive to take less than what they want. I’m sure that Geeley thought they were going to make a steal (if you look at the car world in late 2008, I think everyone assumed that they would), now Ford is profitable and Volvo almost is (JLR was sold at the peak of the credit bubble and now Volvo is for sale as the world comes out of recession, seems thier CFO(s) is (are) doing his (thier) job.)
If GE is working toward balincing their green technology initiative and expanding economies portfolios against traditional hydrocarbon-based transportation modes and mature economy portfolios, then it would seem they are positioning well to become the next owner of a traditional British motor vehicle manufacturer.
Or does this mean that a finance company already owns the car you want to buy? That would be interesting when you want to do your own finance deal with another provider. Would GE Capital give you a better deal if you stay with GE, or, providing your own finance may “upset” GE and they put some more $$$ as a early payout fee? Interesting thoughts.
That is an interesting speculation Mr. Walter. GM has plenty of experience in manufacturing complex industrial products, consumer level marketing and high roller gambling (uh, banking). Relatively few companies have deep experience in all of these areas.
@John Horner
I think you meant to say GE not GM.
It’s been said that Jack Welsch took a sleepy appliance maker and turned it into a bank. That “bank” was at one time the third largest company in the world in terms of capital, revenue, workforce and market penetration.
Well GE sure got penetrated last year. GE Capital nearly crushed the company and they are looking for any way possible to redeem themselves. But this is a huge gamble and a rather unique way to make money. That doesn’t make it less risky, but it is unique. And clearly questionable since technically GE has a financial stake in your car before you do.