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General Electric Capital Corp.
203/357-4000
260 Long Ridge Road
Stamford, CT 06927
www.gecapital.com
Sales
$53 billion
Business Description
General Electric Capital Corporation (GE Capital or GECC) operates in four
key operating segments, as described below:
COMMERCIAL FINANCE
Commercial Finance (35.1%, 35.9%, and 31.9% of total revenue in 2003, 2002,
and 2001, respectively) offers an array of financial services worldwide.
With particular expertise in the mid-market segment, we offer loans, leases,
and other financial services to customers, including manufacturers,
distributors and end-users for a variety of equipment and major capital
assets including industrial facilities and equipment, energy-related
facilities, commercial and residential real estate, vehicles, aircraft, and
equipment used in construction, manufacturing, data processing and office
applications, electronics and telecommunications, and healthcare. As further
discussed on page 17, we acquired the commercial inventory financing
business of Deutsche Financial Services and the structured finance business
of ABB in 2002, and as discussed in note 23, most of the commercial lending
business of Transamerica Finance Corporation in January 2004.
We operate in a highly competitive environment and are subject to
competition from a variety of financial institutions including commercial
banks, investment banks, leasing companies, financing companies associated
with manufacturers, and independent finance companies. Industry participants
compete on the basis of interest rates and fees as well as deal structures
and credit terms. Profitability is affected not only by broad economic
conditions that impact customer credit quality and the availability and cost
of capital, but also by successful management of credit risk, operating risk
and market risks such as interest rate and currency exchange risk. Important
factors to continued success include maintaining strong risk management
systems, customer and industry specific knowledge, diverse portfolios,
service and distribution channels, strong collateral and asset management
knowledge, deal structuring expertise and the reduction of costs through
technology and productivity.
Our headquarters are located in Stamford, Connecticut with offices
throughout the United States and in Canada, Latin America, Europe, and Asia
Pacific.
Our activities are conducted through the principal businesses described
below. For further information about revenues, net earnings, and assets for
these businesses, see pages 16-17.
Real Estate
Real Estate funds the direct acquisition, refinancing and renovation of real
estate assets, and purchases equity investments in real estate properties.
Real Estate loans generally are intermediate-term senior and subordinated
fixed and floating-rate and are secured by existing income-producing
commercial properties. Our business also includes the origination and term
securitization within one year of low loan to value loans. We invest in and
provide restructuring financing for portfolios of real estate, mortgage
loans, limited partnerships and tax-exempt bonds. Additionally, we invest in
equity positions in a diversified portfolio of real estate assets via direct
real estate ownership and joint venture interests. Property types include
multi-family housing, self-storage facilities, warehouses, parking
facilities, retail centers, senior assisted living facilities and office
properties.
Aviation Services
Aviation Services is a global commercial aviation financial services
business that offers a broad range of financial products to airlines,
aircraft operators, owners, lenders and investors. Financial products
include leases, aircraft purchasing and trading, loans, engine/spare parts
financing, pilot training, fleet planning and financial advisory services.
Commercial aviation is an industry in which we have a significant ongoing
interest. As has been widely reported, this industry has been under
pressure, but has undertaken steps to reduce unused capacity and align
costs. Consequently, during 2003, major United States and European airlines
achieved moderate improvements in operations including traffic, revenues and
load factors. Aviation Services, which owned 1,239 commercial aircraft at
December 31, 2003, had 1,236 on lease despite pressure on the industry.
Regional jets, with capacity for 50-90 passengers, have had a significant
effect on the commercial aviation industry in recent years. These jets have
enabled airlines to replace less efficient equipment, both turboprop and
older, narrow-bodied jets. At December 31, 2003, the Aviation Services fleet
included 278 regional jets, diversifying total aircraft holdings. Aviation
Services believes that it continues to offer a suitable range of equipment
that is attractive to the industry. See page 34 for further discussion of
the risks and exposure to the Commercial Aviation industry.
Commercial Equipment Financing
Commercial Equipment Financing finances manufacturing equipment, facilities,
construction and office equipment, corporate aircraft, franchises, trucks
and trailers and a wide variety of other equipment. We also furnish
customers with direct-source tax-exempt finance programs, as well as lease
and sale/leaseback offerings. Customers include manufacturers, distributors,
dealers, end-users, and municipalities. We also maintain an asset management
operation that redeploys off lease and repossessed equipment and other
assets.
Corporate Financial Services
Corporate Financial Services provides equity, revolving and term debt used
by customers to finance acquisitions, business expansion, refinancings,
recapitalizations and other special situations. Customers are owners,
managers and buyers of both public and private companies, principally
manufacturers, distributors, retailers and diversified service providers.
Our industry specialists concentrate on the retail, and media and
communications industries. We also provide senior debt, subordinated debt
and bridge financing to buyout and private equity firms.
Structured Finance
Structured Finance provides equity, debt and structured investments to its
customers, primarily in the global energy, telecommunications, industrial
and transportation sectors. Financial services and products include
corporate finance, acquisition finance and project finance. Products include
a variety of debt and equity instruments, as well as structured
transactions, including leases and partnerships.
Vendor Financial Services
Vendor Financial Services provides financial services to equipment
manufacturers and dealers/distributors in a variety of industries including
office equipment, industrial equipment, information technology equipment,
motor sports and marine equipment, recreational vehicles and
telecommunications equipment. We offer distribution financing programs,
sales financing and trade payables services, including inventory financing,
accounts receivable financing, formula based lending, private label
financing, rental finance, and warranty and collateral management services.
Healthcare Financial Services
Healthcare Financial Services is exclusively directed to the special needs
of the global healthcare industry. We bring a comprehensive set of financial
products and services to that market, including financing for equipment,
information technology systems, real estate, acquisitions,
recapitalizations, turnarounds, and working capital needs. We also provide
tax-exempt financing for non-profit hospitals, vendor financing programs for
medical equipment suppliers, and equity capital for medical real estate
investments. We serve healthcare companies of all sizes across a wide range
of sectors. Customers include hospitals and health systems; physician
practices; outpatient diagnostic and treatment centers; skilled nursing and
assisted living facilities; medical device manufacturers, life science
companies, and other suppliers of products and services to the healthcare
sector.
CONSUMER FINANCE
Consumer Finance (24.1%, 20.1% and 18.3% of total revenue in 2003, 2002 and
2001, respectively) is a leading provider of credit products and services to
consumers, retailers and auto dealers in 38 countries. We offer a broad
range of financial products, including private-label credit cards, personal
loans, bank cards, auto loans, leases and inventory financing, residential
mortgages, corporate travel and purchasing cards, debt consolidation, home
equity loans, and credit insurance. As further discussed on page 19, we
acquired First National Bank and the retail sales unit of Conseco Finance
Corp. as part of our continued global expansion.
Our operations are subject to a variety of bank and consumer protection
regulations, including data privacy. Further, a number of countries have
ceilings on rates chargeable to consumers in financial service transactions.
We are subject to competition from various types of financial institutions
including commercial banks, leasing companies, consumer loan companies,
independent finance companies, manufacturers' captive finance companies, and
insurance companies. Industry participants compete on the basis of price,
servicing capability, promotional marketing, risk management, and cross
selling. The markets in which we operate are also subject to the risks of
declining retail sales, changes in interest and currency exchange rates, and
increases in personal bankruptcy filings.
Our headquarters are in Stamford, Connecticut and our operations are located
principally in the United States, and in Europe, Asia, Latin and South
America, Australia and New Zealand.
Our activities are conducted through the principal businesses described
below. For further information about principal revenues, net earnings, and
assets for these businesses, see page 18.
Global Consumer Finance
Global Consumer Finance is a leading provider of financial products and
services to retailers, auto dealers, and consumers outside of North America.
We provide private-label credit cards and proprietary credit services to
retailers in Europe, Asia Pacific and, to a lesser extent, Latin and South
America. We also provide a variety of direct-to-consumer credit programs
such as personal loans, bank cards, auto loans and leases, residential
mortgages, debt consolidation, home equity loans and the distribution of
credit insurance. Our customers include retailers such as Tesco, Coles Myer
and Wal-Mart.
Card Services
Card Services is a leading provider of sales financing services to North
American retailers in a broad range of consumer industries. Product
offerings include customized private-label credit card solutions for
retailers such as JC Penney, ExxonMobil, Wal-Mart, Sam's Club, Macy's and
Lowe's. Product offerings also include personal loans, home equity loans,
business credit services, and corporate travel and purchasing cards.
EQUIPMENT MANAGEMENT
Equipment Management (8.9%, 9.7% and 9.9% of total revenue in 2003, 2002 and
2001, respectively) helps customers manage, finance and operate a wide
variety of business equipment worldwide. We provide rentals, leases, sales,
asset management services and loans for portfolios of commercial and
transportation equipment, including tractors, trailers, auto fleets,
railroad rolling stock, intermodal shipping containers and modular space
units.
Our operations are conducted in highly competitive markets. Economic
conditions, geographic location, pricing and equipment availability are
important factors in this business. Future success will depend upon the
ability to maintain a large and diverse customer portfolio, optimize asset
mix, maximize asset utilization and effectively manage credit risk. In
addition, we seek to understand and deliver unique product and service
offerings to our customers in the most efficient and cost effective manner.
In September 2003, we acquired the assets of CitiCapital Fleet Services.
Our headquarters are located in Stamford, Connecticut with offices
throughout the United States and in Canada, Mexico, Europe and Asia Pacific.
INSURANCE
Insurance (27.7%, 28.7% and 29.9% of total revenue in 2003, 2002 and 2001,
respectively) offers a broad range of insurance and investment products that
help consumers create and preserve personal wealth, protect assets and
enhance their life styles. For lenders and investors, it protects against
the risks of default on low-down-payment mortgages. For businesses, we
provide reinsurance and primary commercial insurance products to insurance
companies, Fortune 100 companies, self-insurers and healthcare providers.
Through December 2003, for state and local governments and other public
entities, we offered financial guarantees for a variety of debt securities.
In November 2003 GE announced its intent for an initial public offering
(IPO) of a new company, Genworth Financial, Inc. (Genworth), comprising most
of our life and mortgage insurance businesses. We plan to sell approximately
one-third of Genworth's equity in the IPO, and we expect (subject to market
conditions) to reduce our ownership over the next three years as Genworth
transitions to full independence. We commenced the IPO process in January
2004 and expect to complete the IPO in the first half of the year, subject
to market conditions and receipt of various regulatory approvals.
Our headquarters are located in Richmond, Virginia with offices throughout
the United States and in Canada, Europe, Latin America and Australia.
Our activities are conducted through the principal businesses described
below. For further information about revenues and net earnings for these
businesses, see page 20.
GE Financial Assurance
GE Financial Assurance provides a wide variety of insurance, protection and
asset management products to help consumers achieve financial security at
every stage of life. Our strategy is to provide dependable products to
address consumer needs for wealth accumulation, retirement income, personal
protection, and wealth transfer. We distribute these products through a
family of regulated insurance affiliates. Our principal product lines in
North America are annuities (deferred and immediate, fixed and variable);
life insurance (universal, term, ordinary and group); guaranteed investment
contracts (including funding agreements); long-term care insurance;
supplementary accident and health insurance; and consumer club memberships.
Principal European product lines and services are payment protection
insurance (designed to protect consumers' loan repayment obligations) and
personal investment products. Product distribution in North America and
Europe is accomplished primarily through four channels: intermediaries
(brokerage general agencies, banks and securities brokerage and financial
planning firms); dedicated sales forces and financial advisors; worksite
distribution; and direct and affinity marketing. During 2003, (consistent
with GE's announced intent to redirect capital to different lines of
business) GE Financial Assurance sold its Japanese life insurance business.
Consolidation in the financial services industry will create fewer but
larger competitors. We believe the principal competitive factors in the sale
of our products are product features, price, commission structure, marketing
and distribution arrangements, brand, reputation, financial strength ratings
and service. We believe that we are well positioned in the current
competitive environment and will benefit from a number of significant
demographic, governmental and market trends, including an aging United
States population with growing retirement income needs, and an increasing
life and lifestyle protection gap.
Many of our activities are regulated by a variety of insurance and other
regulators. Our headquarters are in Richmond, Virginia.
Mortgage Insurance
Mortgage Insurance offers mortgage insurance products that facilitate
homeownership by enabling borrowers to buy homes with low-down-payment
mortgages. These products also aid financial institutions in managing their
capital efficiently by reducing the capital required for low-down-payment
mortgages. We also have leading mortgage insurance operations in Canada,
Australia and the U.K. and a growing presence in Continental Europe.
The mortgage insurance industry is sensitive to the interest rate
environment and housing market conditions. The mortgage insurance industry
is intensely competitive as excess market capacity seeks to underwrite
business being generated from a consolidating customer base. In addition,
considerable influence is exerted on the industry by two
government-sponsored enterprises, which buy the majority of the loans
insured by mortgage insurers.
During 2003, General Electric Mortgage Insurance Corporation (GEMICO),
requested that its financial strength ratings be lowered from AAA/Aaa to
AA/Aa2 positioning our United States business to operate at lower capital
levels. This change improves our capital efficiency and return on equity
while retaining a conservative risk-to-capital ratio.
ALL OTHER GECS
All Other GECS includes activities and businesses that we do not measure
within one of the four operating segments. A description of All Other GECS
principal businesses follows. For further information about revenues and net
earnings for these businesses, see page 22.
IT Solutions
IT Solutions is a provider of a broad array of information technology
services and products, including full life cycle services that provide
customers with cost-effective control and management of their information
systems. Services offered include remote network/server/security monitoring
and management, client support covering asset management, help desk and desk
side support, as well as program management and professional services for
the security, network, server and storage environments. Products offered
include desktop personal computers, client server systems, UNIX systems,
local and wide area network hardware, and software. IT Solutions serves
commercial, educational and governmental customers in the United States and
Canada. During 2003, IT Solutions sold its business units in Europe.
Competition in information technology services and products is very active
and comes from a number of principal manufacturers and other distributors
and resellers. Markets for services and products are highly price
competitive. Additionally, many information technology product manufacturers
are bypassing traditional information technology resellers in favor of
direct manufacturer relationships with the ultimate end-users. IT Solutions'
headquarters are in Erlanger, Kentucky.
GE Equity
GE Equity manages equity investments in early-stage, early-growth, pre-IPO
companies. This portfolio consists primarily of direct investments in
convertible preferred and common stocks in both public and private
companies; we also participate in certain investment limited partnerships.
The portfolio includes investments in the technology and communications,
media and entertainment, business services, financial services and
healthcare sectors. The portfolio is geographically diversified with
investments located throughout the United States, as well as in Europe, Asia
and Latin America. We ceased making new investments in 2002, but continue to
provide financial support to companies in its portfolio which will be
managed for maximum value over time, eventually liquidating. Headquarters
are in Stamford, Connecticut.
American Communications
American Communications (Americom) engaged primarily as a satellite service
supplier to a diverse array of customers, including the broadcast and cable
TV industries, as well as broadcast radio. It also supplied integrated
communications services for government and commercial customers. We also
operated communications satellites and maintained a supporting network of
earth stations, central terminal offices, and telemetry, tracking and
control facilities. On November 9, 2001, we exchanged our satellite
operations, comprising the stock of Americom and other related assets and
liabilities, for a combination of cash and 31% of the publicly-traded stock
of SES Global, a leading satellite company, in order to create the world's
largest satellite services provider. Our investment in SES Global is
accounted for on the equity method within Commercial Finance.
REGULATIONS AND COMPETITION
Our activities are subject to a variety of federal and state regulations
including, at the federal level, the Consumer Credit Protection Act, the
Equal Credit Opportunity Act and certain regulations issued by the Federal
Trade Commission. A majority of states have ceilings on rates chargeable to
customers in retail time sales transactions, installment loans and revolving
credit financing. Insurance and reinsurance operations are subject to
regulation by various state insurance commissions or foreign regulatory
authorities, as applicable. Our international operations are subject to
regulation in their respective jurisdictions. To date, compliance with such
regulations has not had a material adverse effect on our financial position
or results of operations.
The businesses in which we engage are highly competitive. We are subject to
competition from various types of financial institutions, including banks,
thrifts, investment banks, broker-dealers, credit unions, leasing companies,
consumer loan companies, independent finance companies, finance companies
associated with manufacturers and insurance and reinsurance companies.
BUSINESS AND ECONOMIC CONDITIONS
Our businesses are generally affected by general business and economic
conditions in countries in which we conduct business. When overall economic
conditions deteriorate in those countries, there generally are adverse
effects on our operations, although those effects are dynamic and complex.
For example, a downturn in employment or economic growth in a particular
national or regional economy will generally increase the pressure on
customers, which generally will result in deterioration of repayment
patterns and a reduction in the value of collateral. However, in such a
downturn, demand for loans and other products and services we offer may
actually increase. Interest rates, another macro-economic factor, are
important to our businesses. In the lending and leasing businesses, higher
real interest rates increase our cost to borrow funds, but also provide
higher levels of return on new investments. For our operations that are less
directly linked to interest rates, such as the insurance operations, rate
changes generally affect returns on investment portfolios.
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