Some Manufacturing Companies Also Have Exposure to Credit Markets

According to a recent article in Forbes, it is not just financial companies (like Citi and Merrill Lynch) that have exposure to the credit markets.

A growing number of manufacturers now offer financial services, mostly for customer financing of their products.

For example, in the 3rd quarter of 2007, Harley-Davidson achieved 13% of its pretax earnings from loans and leases. In a recession, not only may people stop buying their expensive motorcycles, but customers who previously bought motorcycles may default on their payments.

GE gets 34% of its pretax earnings from financial services. Deere (tractors), Caterpillar (earthmoving equipment), and Pitney Bowes (postage meters) all get more than 12% of their earnings through financing.

So, there is a danger if the sub prime / mortgage problems spread to other kinds of lending.