DETROIT -- A proposal by Ford Motor Co. to let some dealers buy out the company's interest in their stores for a dollar could deprive them of adequate operating capital, dealers warn.
Ford made the buyout offer last month to every member of its dealer development program, mostly minority entrepreneurs who operate 64 dealerships. Accepting the offer ends the dealer's relationship with Ford's captive finance company, Ford Motor Credit Co.
The captive provides dealer financing for working capital, inventory and mortgages. Leaders of associations that represent Ford's minority retailers say dealers who accept the offer may have trouble finding a source of replacement financing.
Dealers who take the buyout can reapply for financing with Ford Credit, company spokeswoman Meredith Libbey said. "There is no obligation for us to work with any given dealer," Libbey told Automotive News. "And no dealer has an obligation to work with us."
Eddie Corley Jr., president of the Ford Motor Minority Dealers Association, said he generally supports the buyout program. The association is composed mainly of black dealers.
But Corley, general manager of a family-owned Lincoln, Mercury and Volvo dealership in Albuquerque, N.M., said many dealers are having trouble getting private financing amid a continued credit crunch.
The buyout program "is very attractive," Corley said. "But Ford Motor Credit has not come through with the same zeal." Corley's store is not eligible for the buyout program.
Oswaldo Garcia, executive director of the Alliance of Ford Motor Minority Dealers, said the buyout offer "is not bad." But he echoed the point that some members of the alliance, who are mostly Hispanic dealers, could have problems getting new financing.
Ford's dealer development program covers 64 dealerships. About half are owned by members of the minority dealers association, said A.V. Fleming, executive director of the Ford Motor Minority Dealers Association. Garcia said Hispanic dealers own 13 of the stores in the program.
Under the buyout offer, Ford also will forgive capital loans. Eligible dealers have until Sept. 30 to accept the offer and show they can get financing for operating capital.
As part of the program, Ford said it plans to ask owners of dealerships whose losses exceed their investment in their stores to surrender their franchises. They risk having those franchises terminated if they can't finance the buyout, Ford said.
Ford said it is not ending its development program, which began in 1950. But it conceded that the buyout offers will make the program much smaller.
Ford created its development program to help aspiring dealers who lack the resources to buy dealerships. Ford takes a financial interest in development dealerships and allows participants to buy out those interests over time.