Moti Ganz: Diamond Manufacturers Should Sell for Cash

Diamond manufacturers have paid a heavy price “due to the lack of responsibility of the jewelry retailers,” especially U.S. retail chains, said International Diamond Manufacturers Association (IDMA), President Moti Ganz at the opening of the IDMA meeting held in Antwerp March 29 – 30.

According to Ganz, who called to understand and clearly define manufacturers problems, retail chains are in trouble because of their business models. “On the one hand, they want to reduce their diamond buying, but on the other hand they have tied themselves into long-term deals with leases on prime locations, in shopping malls and main street locations.”

“In fact, they cannot get out of these long term commitments unless they declare bankruptcy and put themselves under the protection of Chapter 11. This means that nobody can touch them, that they can reorganize as they see fit,” he cautioned.

Ganz blamed manufacturers who have given retailers goods on long credit terms, often without any redeemable collateral, only for them to be later defined as “unsecured clients.”

The solution is to learn from the producers’ “Golden Rule” - goods for cash only. “Why? Because we're living in a new world. And maybe, just maybe, we need to decide that enough is enough.”

Ganz suggest another model in which manufactures sell goods for cash to polished dealers who in turn extend credit to the market.

The IDMA president said diamond manufacturers need a new business model and should disengage from the financial risk they have been carrying on behalf of the retailers and rough diamond producers.

He said that during the first few months of 2009, demand for polished has dropped 35-40 percent compared to last year. He warned that the price is the loss of manufacturing workforce and knowledge. “Lets not forget that we carry responsibility for the livelihood of millions of people, many of the in low wage countries,” he reminded the listeners, adding, “That puts the issue of corporate and social responsibility right into our laps!”

He further cautioned that, in is estimate, the economy is only one-third of the way into the downturn and that the upturn is “not anywhere close.”

Concluding his address, Ganz asked what he called “the million dollar question” - “will we take control of the industry's leadership. I think we can and we should. It is we who turn rough into the polished diamonds.”