GUS said it had held talks with prospective buyers but none had been prepared to pay a high enough price for the business. Ironically, sources close to the negotiations said one of the stumbling blocks was that GUS was looking for guarantees that staff would be kept on and branch offices remain open.
An industry executive who tried to clinch the deal said: “There were terms and conditions attached to the sale which would have made it hard to proceed.”
Major motor finance houses, such as GE Capital Woodchester and Capital Bank, found little attraction in the General Guarantee loan book which was largely with dealerships already under joint contracts.
General Guarantee and its associated vehicle leasing company, Highway Vehicle Management, were put on the market back in April. It was the second time in 18 months that GUS had tried to sell the businesses. The two companies had combined assets of £1.29bn and debts of £830m.
The company has succeeded in selling Highway Vehicle Management with a fleet of around 18,000 vehicles to First National Vehicle Leasing for £170m. The buyer is a separate division of Abbey National from First National Motor Finance.
John Pearce, GUS chief executive, said General Guarantee was operating in a declining market and the decision to close was “the right one for GUS”. Profits from the division had fallen from £39m to £33.1m in two years, hit by falling residual values, new car loans and rising interest rates.
The phased closure means GUS will be able to collect income on outstanding debt during the three-year period, but the majority of jobs in branches and at head office in Manchester will go before the end of the year.
The failure of the General Guarantee sale clears the decks for bidding on Chartered Trust, also up for sale. Owners Standard Chartered last week announced a major global restructuring with 6,000 job losses worldwide.
As a result, they may be more prepared to accept a more sensible offer than the original £700m asking price. GE Capital Woodchester, GMAC and a bank, rumoured to be Halifax, are thought to be in the running.
Gerard Ryan, GE Capital Woodchester managing director, said: “Over the next 18 months there will be more people exiting from this market. There will be consolidation at all levels. There is too much availability of finance in the market and we are all competing with the direct loan providers.”
He said his company remained totally committed to the motor finance industry and to working with dealers to build long term relationships.