Dollar dazzlers

Dollar dazzlers

General Motors won't be paying out its $1 billion debt instalment to bondholders by June 1.


At a Chinese motor industry summit in Detroit yesterday, GM's Chief Financial Officer Ray Young told the Wall Street Journal that the company was not even planning for the payments, as one of two conclusions would be reached - the company would have reduced its debt by exchanging shares and equity for the debt, like Ford has done, or the company will file for bankruptcy. The latter looks likely.

Meanwhile at Ford, the company's American dealer development program has taken an unexpected turn. The program allows for the less cashed-up dealer to invest in the Ford brand, building a store with Blue Oval money and then paying out the store with sale profits.

Well, sales are rather slim at present, so Ford has decided to cut the weight of the dealer ties with a very, very good offer - own it outright for a dollar.

According to Automotive News, the dealers need to prove to Ford that they have enough equity and finance to continue operating in the black. If they can do so by September 30, they can own the store in full for a buck. Ford will lose short-term cash in the offer, but will free up its financing obligations to the dealer.

It sounds good in theory, but given the program was put in play to help less advantaged dealerships, how many could actually afford to take on the dollar deal?

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