PROVIDENCE – Textron Inc. (NYSE: TXT) plans to shrink its Textron Financial Corp. subsidiary by more than two-thirds, the company announced today.

The $12.6-billion Providence-based conglomerate said it would sell or liquidate approximately $7.9 billion of the $11.4 billion portfolio of Textron Financial. The segment, which has been paring its earnings forecasts since August (READ MORE), has become a drag on the company’s bottom line amid the global credit crunch.

Finance is by far the smallest of Textron’s five business segments, making up only about 5 percent of the company’s revenue this year, corporate figures show. (READ MORE)

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 earlier had announced plans to shed $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 Quintal told Providence Business News.

In addition, the company pared its earnings forecast. Textron said it now anticipates fourth-quarter profit from its non-finance divisions will be between $300 million and $330 million this quarter, down from its earlier prediction of $400 million. The company is due to announce its financial results on Jan. 29.

Textron Inc. (NYSE: TXT) is a $12.6 billion company employing 42,000 people in 28 countries. Its brands include Bell Helicopter, Cessna Aircraft Co., Jacobsen, Kautex, Lycoming, E-Z-GO and Greenlee, among others. Additional information is available at www.textron.com.