Earlier this week, one of our Best and Brightest wondered how Chrysler and GM’s collapse into receivership would affect minority dealers. He wondered if political correctness would color the Presidential Task Force on Automobiles decisions about which dealers get the axe and which don’t. Ford is proactively addressing the issue by launching a new program that allows roughly a quarter of its minority-owned dealers to buy their store from Ford for a $1. For some reason, the Detroit Free Press fails to mention the amount of money Ford has invested in these dealers. Anyway, in a letter to the 64 eligible minority dealerships (out of 255 Ford Motor Minority Dealers Association members), FoMoCo says the “I’ll buy that for a dollar!” deal’s only good “if you are able to provide adequate operating capital at the time of the buy-out.” Good luck with that. On the other hand, the offer expires September 30. A LOT’s going to happen between now and then: cash for clunkers, GM’s C11, Chrysler’s dissolution, etc. A smart man might have a weapon under there. If he did I’d have to pin his head to the panel. I mean, a smart man would wait to see how this plays out before signing anything.
I wonder if a minority-owned dealer would like to option out this offer to me. I’ll give him or her a 100% return on their investment…that’s right, I’ll gladly pay TWO DOLLARS!
Lot of Road Warrior references lately. Sign of the times I guess.
The minority dealerships will need to be protected.
They voted heavily for President Obama.
I’m a minority. I wonder if I could buy into a dealer for $1, help that dealer buy the dealership from Ford for $1, then turn around and sell my interest in the dealer back to the original owner for $15,000.
Anybody interested in my services can reach me via the comments section :)
Many dealers are preparing for GM and Chrysler bankruptcies and subsequent bank call ins of inventory loans which may affect other brands.
http://www.bloomberg.com/apps/news?pid=20601109&sid=aSefFiFMRV2I&refer=home
Robert….
Can you explain why? What does this do for Ford? And is there a downside or risk for a dealer that takes this offer?
Nice RoboCop reference too.
‘Cause there aren’t any white/Hispanic/Indian/Russian owned dealers worth giving this offer to, eh? How about Native Americans? Anybody? Buehler?
PC run amok.
yank,
I would like to take a guess at this.
Under the present program, there are at least two programs within the program. One simply matches a promising minority businessman with someone who is an existing dealer, or wants to invest in a dealership so that the minority dealer gets equity in the dealership overtime as he runs it. Ford may or may not have skin in the game. The other one, which is the one this would likely affect, is where Ford is simply acting like an angel finance source for the minority dealer.
The latter program means that these dealerships may presently be a liability on Ford’s books. By offering the dealership for $1, they can end the bleeding immediately while giving up future returns on any outstanding loans to the dealer.
Basically, if the minority dealer can get another investor or bank to provide lines of credit or cash flow to keep the store open, and buying cars from Ford, then Ford can change a short term liability/long term asset into a short term paper increase on the books. It’s not a decision they would make if they were not squeezed or trying real hard to up the value of the stock for executive compensation purposes (in this case, it’s because they are being squeezed, I believe).
A good reason why companies should not be as leveraged as has become the common practice.
Seems to me that “leverage” goes into the pockets of guys who leave the debt to the corporation. Tying executive bonuses to stock price has led in part to the roller coaster we are on now.
jkross22, good point. Thought we didnt treat people differently because of skin color? PC run amok indeed.
I’ll be standing by for a speech/march from Rev. Sharpton, et. al. Surely they won’t let this racist program stand.