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Providence, R.I.-based Textron Inc. plans to shrink its Textron Financial Corp. (TFC) subsidiary by more than two-thirds, the company announced today (Dec. 23).
According to the Providence Business News, the company said it would sell or liquidate approximately $7.9 billion of the $11.4 billion portfolio of Textron Financial, which has become a drag on the company’s bottom line amid the credit crunch.
Going forward, Textron Financial will limit itself to financing customer purchases of Textron products, such as helicopters, also known as its “captive financial business,” the company said.
Textron Financial had been a key floorplan finance company for the recreational vehicle and marine industries, and the company confirmed with RVBusiness that it will be exiting these sectors.
Finance is by far the smallest of Textron Inc.’s five businesses, making up only about 5% of the company’s revenue this year, corporate figures show.
Textron had earlier announced plans to shed only $2 billion of the financial unit’s portfolio, but the board of directors later decided to exit all of the company’s non-captive financial businesses.
“Executing this new strategic direction for TFC is expected to significantly enhance our long-term liquidity position in light of continuing disruption and instability in the capital markets,” Lewis B. Campbell, Textron’s chairman, president and CEO, said in a statement.
The company also said it plans to increase Textron Financial’s reserves to $130 million, “as a result of continued market stress and the impact of the exit plan.” And the company has extended the revolving period for its $550 million aircraft finance securitization facility through December 2009.
Also today, Textron said it is in the process of cutting 2,200 positions worldwide – but most of those job cuts were announced previously, Textron spokeswoman Karen Gordon In addition, the company pared its fourth-quarter earnings forecast.