Who Would Have Predicted This? 

When assessing risk, a Credit Analyst will actually try to predict the future.  The question at the heart of the decision is the ability of an applicant to pay off the debt they will incur.   

While our Lease Application is a standard process that collects past payment history, our primary goal is to project the company’s future performance.  Two case studies of well-known companies display this central tenet of the credit industry.

Tesla share values are on the rise while the G.E. stock prices have “fallen from grace” and are no longer included in the Dow Jones Average.  The rise of a new company that builds electric cars and the fall of another, especially one that is a household name, intrigued me.  

When an entire strip mall in our community was transformed into a Tesla Showroom, I began to wonder how this risky “start-up” attracted investors to enable this expansion.  A recent search confirmed my belief that Tesla is bleeding money. “Since 2009, Tesla has amassed cumulative net losses of over $6B.”  

Despite these stats, this futuristic Electric Vehicle company has generated revenue of $36 Billion over the past 10 years. The appointment of an independent chairman to replace Elon Musk, as directed by the SEC, may encourage more investment, as reported in an October 8th Bloomberg article.  

At the same time, General Electric, which was founded by Thomas Edison over a hundred years ago, was struggling to attract capital.   It is somewhat ironic that both companies manufacture “electrical” products.

Nevertheless, GE had fallen on hard times as described in a recent news story:  “GE’s stagnant power business has hit new roadblocks, such as a failure of a turbine blade at the Colorado Bend power plant in Wharton County, Texas.

In early October, “the struggling conglomerate abruptly removed John Flannery as chairman and CEO on Monday after only a year on the job, and installed former Danaher CEO Lawrence Culp as his successor.  Fortunately, GE shares, which had fallen to a nine-year low in the prior week, surged in reaction.”

In these profiles, we see one company seemingly thriving, against all odds and all logic, while the other was barely surviving despite their solid history.  These examples serve to prove that the perceived strength of each enterprise is not so much about their past but, is ultimately about their expected future profitability. 

Can we help your business achieve future success?

It’s the lease we can do,

Kevin F. Clune, CLFP
Clune & Company LC