The manufacturers who will navigate the recession best will be those who look after their dealer networks. After all, their policies (excessive standards, showroom investment, complex bonus structures) have put dealers under pressure, squeezing their margins and stemming cash flow.
Manufacturers cannot afford to have a weak network, one where dealers are exiting by collapsing or giving up the franchise.
It’s difficult for them to find replacements; few dealers are looking to expand, especially if it means buying premises which are rapidly depreciating. The exceptions are the likes of Sytner, which can call on the deep pockets of American owner Roger Penske.
Of course, some carmakers see the economic downturn as a perfect way to naturally cull their overblown networks. But it’s not perfect – these dealers won’t necessarily be the worst performers or in the right areas.
Most manufacturers privately admit that they will financially support dealers who they want to retain; others are creating action plans for those dealers most at risk. As one dealer boss said: “If manufacturers want to sustain their networks, they have to help us.”
And they will help. Dealers tell me that the pressure to pre-register is reducing, for example, with some carmakers scrapping or reducing fourth quarter targets; dealers can say no without fear of reprisal.
Those that say yes to pack deals – and there are still quite a few – need to do it for the right reason and that’s because they can buy the cars at such a large discount that they can wash out quickly, keeping cash flow liquid.
Pre-registering to hit volume bonuses is the wrong approach; the long-term damage from stocking charges, trading out at a loss, and the impact on stock turn could prove fatal. It also diverts attention away from ‘real’ used cars.
In the face of all the doom and gloom, of course, is the fact that many people still have money; they are just choosing not to spend because of all the uncertainty. But it has never been a better time to buy a car – new or used. The discounts available are incredible.
Perhaps dealers, carmakers and the media need to do a better job of telling the public.