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isn't that kind of like Toyota financing my car loan

bombcar 3y ago
It's somewhat similar, but Toyota (hopefully) won't have all of its car buyers stop paying the loans at the same time.
gumby 3y ago
Indeed it is and that approach nuked both GM and GE. As bombcar noted in a parallel comment though, it was even worse in the Internet crash. I suppose in today's Bayes-obsessed world another lesson is: don't finance your customers' purchases if your company name is a two-letter acronym starting with G.
- bee_rider 3y ago
  At this rate I’ll never get an Arleigh Burke :(
happytiger 3y ago
It’s exactly the same thing. I don’t know why people think it’s conspiracy to provide financing with equipment sales.
- gumby 3y ago
  What if you don’t have the same controls as a bank and lend to a lot of people who can’t pay you back? In GE's case the finance side of an otherwise manufacturing business became so large that the tail wagged the dog.
  - happytiger 3y ago
    GE’s decline wasn’t because they offered financial services. It's a textbook case of mismanagement of an overly complex business. Tons of companies offer financing for products they manufacture just like car companies have done so since the 1920s — more than *100 years! — and in many cases longer than that. It’s not new. It’s not unusual. What’s different about this? The subject matter? The cloud-as-a-service component? How is it really different from support contracts? It’s really not. Sitting around trying to make it sound like a manufacturer offering financing is some deep conspiracy is crazy talk, no matter how many times I get downvoted for saying it. (Downvoting on hacker news is supposed to be used for deemphasizing poor comments not downvoting people you don’t agree with btw. This isn’t Reddit. The idea is to encourage high quality discussions not win popularity contests and we should endeavor to keep this community differentiated.) I would love to see a coherent argument as to what’s so massively unique about providers financing their own equipment to their channels. I just don’t see it as being anything different from standard. Neither is investing in the most promising companies in your ecosystem unusual for Norge companies. These aren’t unusual things: they are well trodden paths used by many kinds of companies.
    - gumby 3y ago
      It's the dose that makes the poison. Drinking too much water will kill you by messing up your electrolyte balance, yet nobody says drinking water is unusual. There were indeed plenty of missteps, but the imbalance due to GE Capital was the wrecking ball for the company. > The effective end of GE Capital is the end of an important era for the former conglomerate. > The company has been trying to become leaner and more profitable in recent years, selling off its appliance business in 2016, its NBC Universal entertainment unit in 2011 and its light bulb business in 2020, among other divisions. > And while those businesses had a higher public profile than GE Capital, no business was more important to the conglomerate during its heyday than GE’s finance arm. It provided financing on many of its industrial products, such as jet engines and electric power plants, as well as a key source of financing for small business and consumers. It even became a major player in the subprime mortgage business. > But when the housing bubble burst and the subsequent meltdown in financial markets in 2008, no part of the GE business was wounded more than GE Capital, and what had once been a key driver of the company’s success became an albatross... (https://www.cnn.com/2021/03/10/investing/ge-capital-close-aircraft-leasing-sale/index.html https://www.cnn.com/2021/03/10/investing/ge-capital-close-ai...) Or "GE dismantles the business that ended its dominance a decade ago" referring to GE Capital: https://abc17news.com/money/2021/03/10/ge-dismantles-the-business-that-ended-its-dominance-a-decade-ago/ https://abc17news.com/money/2021/03/10/ge-dismantles-the-bus... Or "How decades of bad decisions broke GE" which sounds like your basic thesis (and I agree there were many problems) but describes GE Capital as "the finance company that dealt GE a near-fatal blow during the 2008 crisis." https://money.cnn.com/2017/11/20/investing/general-electric-immelt-what-went-wrong/index.html https://money.cnn.com/2017/11/20/investing/general-electric-... GMAC / Ally Bank likewise distorted GM, but the example of one company is enough for now.
      - happytiger 3y ago
        But to generalize GE as a case study is still incorrect. They are an atypical example. We can find any metaphor we want, cite one or two example companies like GE (and it was bad company management not the fact that they were in finance that sank them IMO — I was a customer of theirs and they were so poorly run), but it won’t make up for more than a century of the practice working across most major industries without problems. I’ve read several books about the GE failure and am widely aware of the problems, but disagree with the mainstream analysis. Nobody wants to pin it on the management but they deserve the criticism. Read * Lights Out: Pride, Delusion, and the Fall of General Electric* if you haven’t — it’s worth the time. Don’t you agree that narrowing down the argument that financing your own product is bad because GE took themselves out with a finance division becoming too critical to their business and then blowing up their business with poor management choices to be overly specific as an example? Broadly, private financing works, and works well.
  - deleted 3y ago
    [deleted]

It's somewhat similar, but Toyota (hopefully) won't have all of its car buyers stop paying the loans at the same time.

Indeed it is and that approach nuked both GM and GE. As bombcar noted in a parallel comment though, it was even worse in the Internet crash. I suppose in today's Bayes-obsessed world another lesson is: don't finance your customers' purchases if your company name is a two-letter acronym starting with G.

bee_rider 3y ago
At this rate I’ll never get an Arleigh Burke :(

happytiger 3y ago

It’s exactly the same thing. I don’t know why people think it’s conspiracy to provide financing with equipment sales.

gumby 3y ago
What if you don’t have the same controls as a bank and lend to a lot of people who can’t pay you back? In GE's case the finance side of an otherwise manufacturing business became so large that the tail wagged the dog.
- happytiger 3y ago
  GE’s decline wasn’t because they offered financial services. It's a textbook case of mismanagement of an overly complex business. Tons of companies offer financing for products they manufacture just like car companies have done so since the 1920s — more than *100 years! — and in many cases longer than that. It’s not new. It’s not unusual. What’s different about this? The subject matter? The cloud-as-a-service component? How is it really different from support contracts? It’s really not. Sitting around trying to make it sound like a manufacturer offering financing is some deep conspiracy is crazy talk, no matter how many times I get downvoted for saying it. (Downvoting on hacker news is supposed to be used for deemphasizing poor comments not downvoting people you don’t agree with btw. This isn’t Reddit. The idea is to encourage high quality discussions not win popularity contests and we should endeavor to keep this community differentiated.) I would love to see a coherent argument as to what’s so massively unique about providers financing their own equipment to their channels. I just don’t see it as being anything different from standard. Neither is investing in the most promising companies in your ecosystem unusual for Norge companies. These aren’t unusual things: they are well trodden paths used by many kinds of companies.
  - gumby 3y ago
    It's the dose that makes the poison. Drinking too much water will kill you by messing up your electrolyte balance, yet nobody says drinking water is unusual. There were indeed plenty of missteps, but the imbalance due to GE Capital was the wrecking ball for the company. > The effective end of GE Capital is the end of an important era for the former conglomerate. > The company has been trying to become leaner and more profitable in recent years, selling off its appliance business in 2016, its NBC Universal entertainment unit in 2011 and its light bulb business in 2020, among other divisions. > And while those businesses had a higher public profile than GE Capital, no business was more important to the conglomerate during its heyday than GE’s finance arm. It provided financing on many of its industrial products, such as jet engines and electric power plants, as well as a key source of financing for small business and consumers. It even became a major player in the subprime mortgage business. > But when the housing bubble burst and the subsequent meltdown in financial markets in 2008, no part of the GE business was wounded more than GE Capital, and what had once been a key driver of the company’s success became an albatross... (https://www.cnn.com/2021/03/10/investing/ge-capital-close-aircraft-leasing-sale/index.html https://www.cnn.com/2021/03/10/investing/ge-capital-close-ai...) Or "GE dismantles the business that ended its dominance a decade ago" referring to GE Capital: https://abc17news.com/money/2021/03/10/ge-dismantles-the-business-that-ended-its-dominance-a-decade-ago/ https://abc17news.com/money/2021/03/10/ge-dismantles-the-bus... Or "How decades of bad decisions broke GE" which sounds like your basic thesis (and I agree there were many problems) but describes GE Capital as "the finance company that dealt GE a near-fatal blow during the 2008 crisis." https://money.cnn.com/2017/11/20/investing/general-electric-immelt-what-went-wrong/index.html https://money.cnn.com/2017/11/20/investing/general-electric-... GMAC / Ally Bank likewise distorted GM, but the example of one company is enough for now.
    - happytiger 3y ago
      But to generalize GE as a case study is still incorrect. They are an atypical example. We can find any metaphor we want, cite one or two example companies like GE (and it was bad company management not the fact that they were in finance that sank them IMO — I was a customer of theirs and they were so poorly run), but it won’t make up for more than a century of the practice working across most major industries without problems. I’ve read several books about the GE failure and am widely aware of the problems, but disagree with the mainstream analysis. Nobody wants to pin it on the management but they deserve the criticism. Read * Lights Out: Pride, Delusion, and the Fall of General Electric* if you haven’t — it’s worth the time. Don’t you agree that narrowing down the argument that financing your own product is bad because GE took themselves out with a finance division becoming too critical to their business and then blowing up their business with poor management choices to be overly specific as an example? Broadly, private financing works, and works well.
- deleted 3y ago
  [deleted]