the marine industry: a look ahead economic outlook: living with mixed signals macro issues will...

THE MARINE INDUSTRY: A LOOK AHEAD

Economic outlook: living with mixed signals

• Macro issues will drive primary upside to forecasted growth …

– Economy growing – albeit slow

– Consumer returning – albeit slowly

– Real estate still struggling

– Commodity pricing up – somewhat contained – slower growth helps

– Gov’t spending – a worldwide headwind

• Marine Market generally responds favorably to mixed signals …

– Retail up in many segments – overall growth in sight

– Channel stress has cleared – now very healthy

– Retail liquidations and wholesale production remain aligned – potential shortages loom in some segments

The Marine Industry:A Look Ahead

The “New” Normal…living with mixed signals

Positive Negative

• GDP Growth

• Equity markets

• Consumer spending

• Field inventory levels

• Increased production

• Improved turns

• Consumer confidence

• Higher unemployment

• Gas/Oil/Commodity $

• Mixed retail sales

• Less dealer outlets v. brands

• Affordability perception

Q3: Previous uptick in sentiment on U.S and global

economies evaporates

Consumer Confidence

Credit Line Utilization

Inventory Turns

6 /GECA Strategic Marketing - Market Intelligence Webinar /

November 1, 2011

For internal use only

Solid Q3 growth calms double dip fears

Source: Bureau of Economic Analysis,

Real GDP Q/Q SAAR & Annual percent change


November 1, 2011


Consumption growth recovers from Q2 decline…

Source: Bureau of Economic Analysis

Real personal consumption expenditures


November 1, 2011


But, spending patterns are uneven

Source: Bureau of Economic Analysis

Real personal consumption expenditures, YoY change

Annual Pace in Sept

Services: $6.12T

Non Durable: $2.08T

Durable: $1.29T


November 1, 2011


Economic activity shows signs of life… increased optimism would help

− Business investment strength continues− Manufacturing remains positive, but with regional variations− Gasoline prices ebb, for now− Euro-debt crisis solution… will it work, for how long?− U.S. political stalemate/fiscal challenges… will policy errors derail us?

− CEO outlook on sales, employment, and investment declined in Q3 − Capex growth historically strong, but likely to ease from high levels− Corporate earnings up and cash at all-time highs

Bottom line: slow growth… no double dip

• Business confidence shaken, but fundamentals remain positive

• Fundamentals slowly improving, but crisis resiliency still weak

++

??

− Confidence at recession levels− Employment growth below breakeven level… claims stuck near

400K− Housing prices remain soft due to foreclosure glut− Stock market decline/gyrations driving consumer caution

• Consumers remain skittish

––

THE MARINE INDUSTRY: A LOOK AT THE MARKET

Market view of marine inventory

• Wholesale shipments now aligned with retail activity (overall)

• Lower field inventories provide opportunity for short-term wholesale ‘outperform’

• Retail sales in all segments find bottom in 2011- trending up

• Consumers find ways to participate – and generally appear to be moving toward lower cost units

• Age of existing fleet + scarcity of late model pre-owned can stimulate “new boat” retail growth in spite of macro headwinds


Modest retail improvement suggests potential for boat inventory shortage

Sources:GE InternalWholesale Boat shipment data provided by NMMA MSR

Retail Registration data provided by SSI

New Boat Retail Activity v. New Boat Wholesale Shipments

The market at a glance…• Production adjustments

compensated for reduced demand

• Responsible production scale backs cleared the channel of product overhang

The market at a glance…• Production adjustments

compensated for reduced demand

• Responsible production scale backs cleared the channel of product overhang


The distribution channel: What’s in the field


Source: GE Internal

Field Inventory @ Historic LowField Inventory @ Historic Low

Some other positive signs…

• Overall, wholesale shipments & Retail registrations up

• Average consumer boat age: 21 years (up 5 years from 1997)

• Personal income holding steady

• Increased aging population (40+) may stimulate demand


GE CAPITAL, AMERICAS CFO STUDY

What do other OEMs think?GECA CFO study of

mid market manufacturers

• Confidence down slightly, but still planning to invest and hire in spots

• Rate optimism of their own company higher than globally

• Global pessimism makes us cautious


Key learnings:GECA CFO Survey

Current / prospective business environment:

–Previous uptick in US & global economic sentiment evaporates

+Overall sentiment regarding own industries remains somewhat optimistic

–Growth expectations fall for own industry and for broader economy

–Budget deficit remains leading economic concern



Company performance outlook:

–Lower expectations about company growth, 1-3 years

–Lower expectation of profit margins, down from Q1’11

+Majority maintaining plans to grow cost structure in 2011

+12-month comparison on new order pipelines remains positive

–Fewer expect revenues to increase vs. Q1’11

+Majority raising prices in 2011 compared to 2010



Capital market conditions & financing needs:

+Additional financing needs most likely for equipment and working capital

•Need for financing, cost of capital and availability in the next 12 months expected to be similar to those expected a year ago

Key confidence indicators

•Layoffs stabilized, small increase since Q1’11

+Hiring continues, cautiously

•No change in CAPEX spending 2011 vs. 2010


Budget deficit and housing market top economic

concerns

• The U.S. deficit remains an increasing area of economic concern

• Oil prices are less of a concern compared to Q1’11

• Credit market liquidity still less of a concern compared to Q3’10

• The U.S. deficit remains an increasing area of economic concern

• Oil prices are less of a concern compared to Q1’11

• Credit market liquidity still less of a concern compared to Q3’10

Q6. From the list I am about to read to you, please tell me what concerns you most with regard to its potential impact on the growth and stability of the U.S. economy in 2011?

Q6a. In your opinion, which of the following conditions do you think will contribute to higher interest rates?

Concerns about growth and stability of economy

GECA CFO Survey

OUR COMMITMENT


November 1, 2011


• Smaller, more focused balance sheet $597$440

44

GE Capital – Transforming our business

Note: Cash, short term debt, ENI and non core assets as of 3Q’08

Today2008

($ in billions)

• Much more cash on hand $12~$90

11

• Significantly higher capital 5.7%10.4%

22

• Increased Risk/Regulatory leadership 33 ++

Committed to Main Street success…


GE Capital, CDF Marine portfolio:

High Quality

• Staying committed through the down turn

• Remaining open for business

94.3% of orders in 2011 approved

~ $1.3B of Marine Wholesale credit availability exists today


Improving the customer experience: industry-wide changes that benefit

dealers

• Improved curtailment program of 2% at day 270 and monthly thereafter

• No curtailments billed during off-season: November through February.

• Enhanced Pre-owned advance rates

• Flexible pre-sold programs

• Commercial team re-aligned for better service

• New Inside Sales team

Our Customers Spoke, We Listened.


Added tools for business building

COMS for Dealers(2012) Business

Intelligence

Exclusive Market Intelligence and

Insights

Access GE


Summary…

• Choppy economy continues, but underlying strength in industry fundamentals: Inventory turn, inventory aging and improved customer financial strength

• Most dealers have high level of available wholesale credit

• Older boats now on the water + limited level of late model pre-owned product suggesting some potential for growth

• Longer-term trends bode well based on demographics (larger number of boat-buying age consumers)


GE Capital,Commercial Distribution Finance:

Building Smart Growth, with Smart Capital

• Supporting the Marine industry… committed to your success

• Capitalize on market trends – gain “first mover” advantage

• CDF will be there to help you


the marine industry: a look ahead economic outlook: living with mixed signals macro issues will...

Documents

look aheadthe marine

segmentsthe marine industry

new boat retail growth

slow growth

growth economy

q3 capex growth

segments overall growth

mixed signals retail