IMI Magazine

IMI Magazine

Dealer Development - From Minor to Major

It was the beginning of the run-up to Christmas 2003 but a group of dealers were not exactly in festive mood. After a Ford dealer conference, they met in the bar of the Metropole Hotel at Birmingham’s NEC to air their frustrations. As Philip Maskell, chairman of Essex Ford, recalled: “A series of working groups under the auspices of Ford had been set up to look at ways of improving business efficiency, but we felt they were going nowhere. We needed something more dynamic.”

What followed was a series of clandestine meetings with more dealers coming on board, all sworn to confidentiality. Thirteen months later, this best kept secret came into the open. Twenty privately owned dealerships announced that they had set up a collective called the Retail Automotive Alliance. With its members having a combined turnover of more than £2bn, notionally it becomes the second biggest motor retail group in the UK, slotted between Pendragon and Reg Vardy.

Though the RAA members represent 14 franchises, they’re more than 80 per cent weighted towards Ford outlets. The alliance is backed with £500,000 of share capital and the chief executive is former Ford finance director Paul Knight. Members retain full control of their businesses and for customer-facing purposes will continue to trade under their existing names.

At the official launch, founding members were anxious to play down any suggestion that the main purpose was to toughen their bargaining position on vehicle acquisition. “We’re not seeking confrontation but collaboration with the vehicle manufacturers,” said Maskell, chairman of the alliance and a former chairman of the Ford dealer council.

But Alan Pulham, franchise director of the Retail Motor Industry Federation – describing it as “probably the most significant move in dealer network development for the past 20 years” – said: “It will probably have the effect of driving down prices, but there will be higher volumes to compensate. More vehicles at a more competitive price through the RAA is better than deals with the likes of Hertz and the Royal Bank of Scotland.”

Maskell himself spoke of “disorderly marketing in terms of differentials on dealer vehicle programmes…playing the game with pre-registrations is something we would prefer not to see happen….we want to influence vehicle manufacturer policy and seek a level playing field (with the major PLCs)”. However, the RAA insists that the main thrust of its efforts will be on cutting the cost base of members through such ‘co-op’ initiatives as bulk buying of lubricants and other consumables, shared vehicle storage and PDI facilities and insurance.The alliance points to the manufacturers’ example of savings that can be achieved through ‘premium suppliers’. Other ideas which could be introduced across the member network include car rental, accident repair and servicing offers.

The initial get-together at the Metropole was followed by further meetings at venues in London. One of these was attended by Prof. Garel Rhys of the Cardiff Business School and John Kiff, director of the International Car Distribution Programme, who were commissioned to prepare a study of the founding group's proposals. Their conclusion was that it was feasible. As Rhys later commented: “Given the new challenges of the post block exemption retail motor industry climate, dealers have to think outside the box. This is a remarkable initiative – possibly unique in the world. There should be significant benefits to this alliance on operational, franchising and purchase projects. The networking opportunities between like minded entrepreneurs should result in many valuable business gains.”

The alliance justified its pre-launch secrecy by saying that it didn’t want Ford to hear of plans which were still “half-baked”. Ford chairman Roger Putnam and managing director Paul Thomas were, however, informed of the venture at a meeting at Essex golf club Stock Broom Manor five weeks before the official launch.

Ford’s official response after the launch was this brief statement from dealer operations director Yaser Shabsogh: “This is an independent dealer initiative which we note with interest and which we hope will translate into an even better level of satisfaction for Ford customers.”

RAA member Brian Gilda, chairman of Peoples, maintains that the Ford name will also benefit, explaining: “Being privately owned, we’re better placed to protect brand equity.”

Maskell added: “PLCs have to be driven by share price and are dependent on which manufacturer is offering the best deal at any given time. If one manufacturer is not flavour of the month, they will turn to someone who is.”Another RAA member, who asked not to be named, commented: “This is an example of a dealer network taking control of its own destiny, rather than being manufacturer led and us expected to follow.

“Historically, Ford has discussed strategy with the PLCs and there’s been no similar facility offered to private groups.”The RMI’s Alan Pulham added: “Paul Thomas is going to think about this, not necessarily in terms of confrontation but certainly recognition.”

Central buying, the Vauxhall way Vauxhall dealers can also take advantage of cost savings through central buying, except in this case it’s operated through the manufacturer.

The Retailer Cost Reduction Programme was set up in 2001 and last year it was extended to two other networks, Opel Ireland and Chevrolet (formerly Daewoo) UK.

There are currently around 30 cost saving initiatives, including fixed line and mobile phones, electricity and gas, insurance and stationery.

A committee comprising manufacturer and dealer representatives periodically reviews the savings portfolio. Any new items are trialled among selected dealers before being offered to the rest of the network.

“Take-up on the programme is pretty much 100 per cent,” said a Vauxhall spokesman, “although some dealers may prefer to remain with their own supplier on some purchases.”He declined to put a figure on the savings.