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Mon April 29, 2013
GE Capital Ends Funding for Small Gun Retailers
When GE Capital announced it will no longer finance gun purchases at small firearms dealers, it predictably drew both praise and criticism. But the company’s own explanation of the move seemed to raise more questions than it answered.
Last week, the Wall Street Journal reported that GE Capital, the financing arm of General Electric, is cutting off funding for stores that exclusively sell guns. GE Capital spokesman Russell Wilkerson sent a statement to WNPR saying its decision was the result of “industry changes, new legislation and tragic events.” The decision extends a policy put in place in 2008, but it will affect less than 75 retailers. That’s just .001 percent of all gun retailers – and a pebble in the ocean of the company’s sales revenue. GE will continue to fund gun manufacturers and diversified retailers who also sell other goods. Lawrence Keane, general counsel at the National Shooting Sports Foundation in Newtown, estimates only around five percent of retail customers who buy firearms apply for financing – someone buying a gun for a few hundred dollars is not going to need it.
“The reality is it’s really not used to purchase firearms at the small retailers – mom and pops. It was used by law enforcement officers to finance purchases of equipment so they’re actually hurting law enforcement members, or by folks who are purchasing safes to store firearms. So it also hinders the ability, to some extent, of individuals to properly and responsibly secure firearms.”
According to Keane, the market will continue to provide what customers want. More than one hundred million civilians in the United States own over 300 million firearms, and manufacturers can’t keep up with demand for some models. He says other financing companies have already approached gun retailers, offering to replace GE Capital as a source of funding.
“They are free to make their own decisions in the marketplace and others will step forward. For example when eBay stopped allowing the advertising of firearms on eBay, it created a market opportunity and that’s what gave birth to an entity which is a very large company now, that’s sort of become the eBay for guns.”
To the contrary, Liddy Karter, managing director of Enhanced Capital Partners, a private equity firm in Stamford, and a GE shareholder, says the company is probably getting out of a segment where it does not expect much revenue growth.
“I think it’s significant as a market indicator. I think General Electric, like any investor, is looking at the market for gun retail and understands that is probably not a growing market when the vast majority of the American population has indicated that they really want a different set of limitations on gun sales.”
Not all customers are cheering. Some took to social media saying they’re going to boycott all GE products in protest. Wayne Buck, professor of business ethics at Eastern Connecticut State University, says that’s going to be tough since GE makes almost everything from washing machines to jet engines.
“Well first of all that’s almost impossible to do. What are you going to unscrew every light bulb in your house that was made by GE? I think the one place where GE is open to criticism on this is the charge that they’re being hypocritical in the sense of no longer extending financing for gun purchases at dedicated gun shops, but continuing to provide that financing at much larger companies such as Walmart.”
WNPR contacted GE Capital about continuing to finance gun makers and large box-retailers – the company did not respond. But Narasimhan Srinivasan, professor of marketing at the University of Connecticut, is not surprised that GE hasn’t cut off funding for all firearms-related activities.
“If GE were to say ‘I’m not going to fund retailers which sell other goods than just guns, it would be shooting themselves in the foot. It would not make good business sense and I do not expect that to happen. Also I do not think it is going to be effective in trying to control the sale of guns because the funding is meant not just for one particular product category but for the entire basket that the company might be engaged in.”
Which still leaves the question of exactly why GE stopped funding small retail gun shops. ECSU’s Wayne Buck has a theory.
“My guess is this was primarily driven by their local presence. So many of their employees live in the local area because this is where GE is headquartered. Many of their employees had students who went to Sandy Hook. The father of the shooter is an employee of GE in the finance division. And knowing what I know about, sort of, corporate cultures, my guess is that this was probably top most in their mind.”
Note: The University of Connecticut’s Prof. Srinivasan is not related to the reporter.