28 January 2013

Former British prime minister Harold Macmillan was once asked what was the most difficult thing about running a government. He is alleged to have replied: ‘Events, dear boy, events’.

So, you can spend half the year planning your Q1 budgets only to find the whole country paralysed by a couple inches of snow for the last two week of January. Or you can recruit more staff, only to find the country on the verge of a ‘triple-dip’ recession and sales falling away.

Whichever way you look at it, it’s not been a great couple of weeks to be in retailing. Fortunately buying a car is not (generally) an impulse purchase. For many people, it’s a necessity – especially at the low end of the market – and hopefully that means sales are not lost, just postponed for a few weeks.

But it would be naive to pretend this is going to be an easy year for the industry. Retail group bosses tell me they are already nervous about the sheer number of cars that are going to be pushed their way and the demands that manufacturer partners are putting upon them.

Underpinning that concern is the stronger legal position that the manufacturers will find themselves in when the current Block Exemption regulation expires at the end of May.

Yes, they will be able to insist on single franchise showrooms; yes, they will be able to insist on dedicated franchise staff. And, no, you will not be able to sell your franchise without getting their permission first.

As one well-placed source told me last week: “manufacturers are looking for more investment in walls and people”.

Is that wise? Nobody has yet produced convincing proof that investing in expensive premises helps to sell more cars. And reducing staffing ratios has been a key factor in many auto retailers surviving the current financial crisis.

Of course dealerships have to adapt; of course brand standards have to be maintained. But now is not the moment for carmakers to be insisting on multi-million pound investments in steel and glass monuments to their egos.

Rupert Saunders

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Tags: Block Exemption, budgets, franchisees, investment, retail groups, staffing