GE – How NOT to exit a market! A case study showing how to decimate your market value

GE Money’s exit from the local finance industry in Australia is an excellent case study in how NOT to treat your clients and distribution channel.

If one was to follow the trail of events prior to their ungainly exit, it quickly becomes apparent that they could not have done any worse if they tried. In fact it was so bad that if they ever decide to re-enter the market in Australia, they will meet such vehement opposition from brokers and clients that they would be forced to abandon such an attempt before it began. Further the matter can be proceeded by seeking help from any professional business marketing consultant to keep things on track.

Less than three months prior to announcing they would not pass on any of the Reserve Bank’s 100 basis points October rate cut, GE Money invited their core mortgage managers to Melbourne for a presentation. That same day, their Australasian CEO had proudly announced in the Financial Review that GE would be the dominant player in the wholesale funding market by the next few years. Indeed, all who attended the presentation were encouraged to read this article.

The presentation began with just how enormous GE is as a global company, and how important it was that they had a AAA credit rating. They even took a swipe at their local non-bank competition, insinuating that they would soon be the only non-bank wholesale funder left in Australia.

Drinks and a lovely dinner followed.

Alarm bells then rang when GE delayed their announcement concerning an October rate cut. Then, when they announced there would be no reduction in their rates, the writing was indelibly inscribed upon the wall for all to see.

GE then announced their departure from the residential mortgage and car finance markets. Their local staff deserve much sympathy as I am sure this was as big a shock to them as it was for the rest of the industry.

So, now we have GE Money clients with loans more than a whole percentage point above every other lender. Naturally, and through no fault of theirs, they look into refinancing these loans. As a public relations exercise one would have thought that GE would make it as easy for their clients as they could, since they were responsible for them being so significantly disadvantaged.

No. When GE was approached by a mortgage manager keen to do the right thing by their clients and offer an easy transition to another lender, GE responded by offering a $500 discount. Sure, $500 is a lot of money, but not when the fees to discharge your loan are measured in the thousands.

Not only has GE Money left their residential customers high and dry with an inflated interest rate, giving them no choice but to seek refinancing, but they also want to hit them with thousands of dollars in fees to actually accomplish this.

Clients of GE can certainly be excused for believing they have been forced to lower their pants and grab their ankles.

Mark Rice, GE Money’s CEO, was recently interviewed and happily gave his opinion regarding how the finance market should be run. Even if Mr Rice had no input into the decision to close up shop, and he probably did not, this is a bit rich for those in the industry who are left to pick up the pieces.

GE Money Australia has been a victim of its international parent, but one cannot help but think that those in charge here have not fought loudly enough for the clients they have abandoned.

With non-banks suffering from the Federal Government’s guarantee of bank deposits, the ever increasing cost of funds and the fallout from the credit crisis, the last thing they needed was an own goal.