7 May 2008

DMC in Receivership

The court decision has been made: DMC is in Receivership
This means they have 6 months.  The press release included this lovely spin:
"With the support of the official receivers (administrateurs judiciaires), these decisions give all the DMC companies the time required to find solutions allowing the interests of the staff and shareholders to be upheld and for a future to be mapped-out for these companies.

A new era in the history of the DMC companies has started today. By introducing appropriate solutions, it should enable all the companies to be provided with the means of facing-up to the constraints being placed on them: the fall of the dollar versus the euro, Asian imports and consumers’ concerns about their spending power. "
Now that is great spin about a decision to be placed under the administration of external accountants ("the administrators") to sort out the mess. 
It is sad to see that avoiding the problems and not reacting to internal accounts leads to these type of results. Either their accounting system didn't give them timely accurate reports, or they didn't pay attention to them. Either way, being placed under administration is not a good "new era" unless the old self controlled one was a bad one.
Now what? The administrators of DMC have up to six months to work out the accounting mess and see if there is anything worth saving. Can they change the cost structures enough to still make money considering the effect a devaluating dollar is having against fixed Euro costs?
A brief explanation: When the costs are in Euro and sales are in US dollars, if each US dollar buys less Euros, it means more US dollars are needed to cover the same costs. 
This can only be achieved by 1) selling more, 2) charging more or 3) spending less. It is up to Administrators to find out to what extent they can do all three. But because DMC management wasn't able to do it themselves, it must be done in a short time, with the public and business partners nervous and the economy looking flaky.
Interesting times ahead.

1 comment:

George said...

Four years and half after, this post brought me a few memories... "This can only be achieved by 1) selling more, 2) charging more or 3) spending less." is still a good tip for all companies, not just DMCs, you know?