US big boy GE Capital prepares for onslaught after buying AGC

By Duncan Bridgeman

Friday 21st June 2002

US giant GE Capital is preparing a massive campaign to educate its unfamiliar New Zealand market after its recent acquisition of Australasian finance company AGC.

But the marketing effort will not be plain sailing for the new entrant, part of a company best known here for making products such as light bulbs and electric appliances.

GE Capital, the finance arm of sprawling Connecticut-based industrial and finance empire General Electric, launched its assault on the lending business of New Zealand banks last month with a $1.65 billion acquisition of AGC. The deal, subject to regulatory approval, could potentially double the size of AGC in Australia and New Zealand, creating the region's biggest consumer finance company.

The company plans to cross-sell life insurance, personal lending and credit card products through its enlarged customer base - a move that is sure to make Australia and New Zealand banks nervous.

Sandra Philpott, vice-president of marketing and business development for GE Capital's commercial division, said the initial marketing campaign would focus on educating existing AGC customers using conferences and seminars rather than mass marketing.

"My role is to take six different business segments which are branded differently and integrate them under the GE Commercial umbrella," she said.

"The GE brand was valued at $US40 billion last year. The key is to extract the value out of that so we plan to talk to customers and find out what they think before going ahead with traditional marketing."

The first conference was planned to take place in Rotorua next month.

Ms Philpott said the company would eventually advertise in mainstream press and trade magazines, although as yet no advertising agency had been chosen.

"We're not that far down the track. We need to look at all the agencies and see what they have to offer, but in the short term we'll continue to use our Australian agency."

Nor had a marketing budget for New Zealand been set but Ms Philpott said by the end of July the company should have worked out a business model that included marketing expenditure.

It is unlikely the marketing department will be strapped for cash.

GE Capital worldwide has accounted for 40% of total GE earnings for the last five years and, according to Ms Philpott, revenue has grown 30% a year in Australia. The acquisition of AGC should help GE Capital gain receivables of more than $18 billion a year in Australia and New Zealand.

Although GE previously had a low profile here - New Zealand is not among the countries listed in the "country search" facility on its website - it still had wide-ranging presence here before it bought AGC.

The industrial business supplies medical, power and lighting equipment, industrial systems and plastics, and about 80% of Air New Zealand's aircraft are powered by GE engines.

The finance business, GE Capital, has branch-based personal loan business and a sales finance unit. It lends on vehicle fleets and plant, equipment and machinery and supplies employees' reinsurance to companies and mortgage insurance to banks.

It leases aircraft worldwide and counts Air New Zealand, Qantas, and Virgin among its regional clients.

The AGC acquisition more than doubles employee numbers to around 470.

Ms Philpott, who helped launch the GE Commercial brand in Australia two years ago, said the New Zealand market was more fragmented than Australia's and the smaller market meant the split between banks and finance companies was more distinct.

"We're not a bank, we're an asset-based lender with a different proposition in the market place.

"There's a good synergy between the services of AGC and GE but the challenge is how we deliver that."

The company would also look to form strategic alliances with partners and associates in its target industries such as construction, forestry, transport and manufacturing.

AGC was previously the finance arm of Westpac Trust.

GE will gain a million additional customers from the purchase, making it about twice the size of its nearest competitor in Australia, ANZ-owned Esanda, but still number two in the New Zealand market behind ANZ's UDC Finance.

As part of the deal, Westpac will be granted certain marketing rights in relation to the AGC business finance portfolio. These arrangements will enable Westpac to continue to offer a full range of products to its existing business customers who have facilities with AGC.

Westpac said in May that the sale of its AGC consumer and business finance unit provided the bank with the opportunity to invest further, including the high-growth area of wealth management.

Comments from our readers

No comments yet