The Hard Dollars
Like declining stock prices or real estate, the diminishing money is neither uniformly helpful nor harmful. Consider Accor North America, Inc., a division of Paris-based Accor, the operator global hotel. When the company wants extra funds, perhaps to create an acquisition, the dollar declining comes in handy. “Advantage taking of the dollar deflation means that it’s cheaper to use from our parent than a bank,” says Stephen Manthey, senior V-president and treasurer with the Carrollton, firm is based in Texas. This is because the guardian company’s euros now are more costly than they were a year or 2 ago.
On the other hand, “we have more anxiety on results,” says Manthey. “If we’re money making, we can’t send it back to our parent, because the ratio is dollar/euro so weak. We’re handcuffed to the cash.” For example, although Accor sell its Red Roof subsidiary in 2007 September, netting about $400 million, Manthey since has reserved the funds in the U.S.A. “It’s not worth taking the strike. A better solution is to competently use the capital in the U.S.,” maybe by making an acquisition, he says.
“In my view, decline the dollars is both a positive and a negative for us,” Manthey says. This is the case more largely, as well. Exporters classically do well when their currency falls, as their products become more spirited outside their home bazaar, says Animesh Ghoshal, economics professor at Chicago, DePaul University, Conversely, importers take a hit, as the prices of their goods or materials increase.
Via: Businessfinancemag.com