Trevor Finn has told Pendragon's shareholders to expect “significant consolidation of car dealership networks” leading to a market dominated by as few as three or four companies.
The chief executive promised Pendragon would “build on its position and be the leading consolidator in the market”. Mr Finn thrives on change and has dismissed those critical of Pendragon's huge bulk – around 200 outlets feeding a £2bn turnover.
The criteria for survival would be the “ability to adapt to change”. He predicted tough times ahead as the industry braced itself for major changes to Block Exemption in 2002.
“Consolidation will be driven by the lack of adequate returns in the industry and the subsequent lack of fresh investment,” he said. “Any changes to Block Exemption will make the market more competitive and increase the pressure to be more efficient and do the job properly”.
Pendragon has a number of problems. Its huge joint venture with Ford, operating 30 dealerships, continues to prove a worry. It lost £1.4m in the first half of the year and new car sales have fallen.
Mr Finn described its performance as “poor” and attacked Ford for its pricing policy and lack of action. Pendragon is reducing fixed costs by closing two satellite outlets and “aggressively centralising” back office functions at its call centre and head office near Nottingham.
The group has threatened to start importing some cars from the Continent where this was commercially viable. But Mr Finn said he “earnestly” hoped he would not be forced into it and recent price cuts made the action less likely.
Mr Finn said Pendragon had sold 32 businesses in the first eight months of this year as it absorbed the Lex purchase, restructured and reduced debt. It also bought Jaguar dealerships in the US and Germany.
More than £50m has been taken off the borrowings which peaked at £184m at the time of the Lex acquisition in March. Pendragon still has more than £120m in freehold property which Mr Finn is keen to release.
Pendragon recently lost its exclusive rights to Fiat (and six outlets) in London after six years. But the concept of one group managing large sales territories is a key strategy for Mr Finn.
“We couldn't get a return that justified the continuation of it,” he said. “I don't believe the model is flawed – this was a franchise-related issue and we learned a huge amount.”
Pendragon has pulled out of Peugeot and is gradually withdrawing from Audi, VW and Toyota. The group is focused on consolidation.
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