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Pablo Peñaloza

MEXICO - Finance

Going Well

CEO, GE Capital Mexico

Bio

Pablo Peñaloza is the CEO of GE Capital Mexico. He holds a degree in Business Administration from the University of Massachusetts with a focus on Finance and Economics. Pablo joined General Electric’s Financial Management Program (in 1989) and had assignments at GE Energy in Schenectady, Houston, Virginia and Cincinnati. After completing the program, he held various finance positions within GE Energy in San Juan, Puerto Rico. Later, he joined GE Industrial, where he held positions in Puerto Rico, Mexico and Brazil in 1995. In 2004, he joined GE Aero Energy in Houston Texas, as Global FP&A Manager; and in 2008, he joined GE Aviation Services as CFO of Unison Industries, in Jacksonville, Florida. Afterwards, he was named CFO for the GE Capital Americas business in 2009 and he was promoted to his current position at GE Capital in 2011.

"We are not bankers, but builders who partner with companies by understanding their challenges."

What have been the milestones of GE Capital Mexico since its establishment in 1993?

In 1993 we entered the market through a joint venture. The first couple of years were spent learning how to do business in Mexico, and acclimatizing to the business environment. We established our own legal entity in 1995, and from then on brought GE Capital products directly to the market. Our first customers were in the Monterrey area, because we specialized in products that were rather new to the market, such as our financial or operating leases, and Monterrey is the most financially advanced city, and hence a logical point of departure. In 1997-98 we started introducing other GE Capital products, such as the fleet business, and in 1999 we brought our Corporate Air product. It was also around that time that GE Capital purchased Heller Capital; a factor also integrated into our local business in Mexico. It was from then on that we really started growing in Mexico. In 2007 we introduced our latest service, in the form of technology finance products. The year 2013 was our greatest milestone, registering revenues of $1 billion in Mexico.

Which key drivers that led to this success?

We are not bankers, but builders who partner with companies by understanding their challenges, offering products that add a unique value. For example, in our fleet services, while we offer the lease component, our customers can also take on the maintenance option. When a client wants to acquire a vehicle, we can offer them a comparison with other models and give them a tool called Total Cost of Ownership, whereby they get a complete view of how much owning a vehicle will cost them through the entire lifecycle of that product, including insurance, preventive maintenance, corrective maintenance, and so forth. We offer them a product that is tailor made to their needs.

“We are not bankers, but builders who partner with companies by understanding their challenges.”

You have a $3 billion portfolio of financial assets; how is it broken down?

Around 50% of our portfolio is comprised of leases and loans. The rest is split between our products, fleet, technology finance, and working capital, etc. Of those products, the most profitable are those that have value added, such as our fleet services of strong operational intensity. Maintaining a fleet business where you take care of both financing and maintenance is labor intensive, but our customers are aware of its value and are willing to pay for it. Our Corporate Air services are also highly profitable, and we have customers like Aero Mexico, Interjet, and Volaris, and see marked growth potential in the segment. The commercial aviation services are taken care of from our site in Queretaro, which also oversees the energy and oil and gas business lines, with those products being supported globally.

What are your views on Mexico’s aerospace industry?

In 2013, we immersed ourselves in that industry, which remains in its infancy. Companies like Bombardier and Rolls Royce already have assembly plants here, but the sector mostly deals with assembly, although there are some suppliers producing their own goods in Mexico. In this industry, there is little tolerance for variations in quality and manufacturing specifications. It takes time to develop suppliers capable of participating in this industry, and to attract suppliers to Mexico to construct their components here, rather than bringing those components here to be assembled. Yet we developed our automotive industry, and can repeat the performance with the aerospace business.

SMEs are an exciting growth segment in Mexico. Which of your services most target SMEs?

A number of services are of benefit, such as power generation equipment. We give them the opportunity to better finance this equipment and make rationalize the cost of electricity for companies, thereby helping them become more competitive on both a local and global scale. To give another example, our oil and gas business provides and finances equipment for drilling sensors; a service not financed by any bank. Many SMEs may not be able to access financial markets for such equipment, but we enable this. A third example is that we enable our customers to assign value to, and monetize, equipment, with which they can use the funds to expand or make new acquisitions. Therefore, we provide flexibility in terms of what the customer can monetize. As a result, we have been growing annually in the SME segment, from which about 50% of our revenues derived in 2013. Moreover, Mexico’s new reforms will also spur competition, which will further expand the SME segment.

What challenges have you found in financing SMEs in Mexico?

Some companies have grown rapidly in that segment in the last few years, but they may still have a small company structure and managerial outlook, which can be a hindrance to commercial performance. Some companies can reach sales figures of $100 million, and remain managed by a single person. They need to adapt their managerial structures to growth, which would render them more conducive to doing business.

Where do you see the company in Mexico in the next 10 years?

We plan to continue expanding at slightly over the growth rate of the Mexican economy. We want to expand into construction equipment, and oil and gas services, and to sustain overall growth to propel ourselves to the next level in Mexico.

© The Business Year – February 2015

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