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Manufacturers aiming for 10% retail stakes

Carmakers are preparing to take stakes of around 10% in many leading dealer groups, according to retail chief executives. The policy will alarm single outlets and small groups, which would come under increasing pressure.

Fred Maguire, Lookers executive chairman, said: “I expect manufacturers to buy premises and lease them back to dealers. “They are likely to take 10% shares – most do not want to make the substantial investment we have seen from Ford. But they see taking a stake as a way of protecting themselves.” Mr Maguire said manufacturers were likely to partner dealer groups in and around major cities because costs were so high. The need to reduce costs, in the face of continuing competition from online-based new entrants, could drive manufacturers and retailers closer together. Former Hartwell chief executive Ed McCabe, now chief executive at Ebbon-Dacs, an online software firm set up by Hartwell parent Jameel Group, said dealers and carmakers would have to share systems and brands. “Manufacturers are spending billions of pounds on product development and marketing,” he said. “They want their dealers to be an extension of their brand in order to give customers the complete experience. “Manufacturers want to get much closer to customers. They will need to integrate IT systems with dealers, giving them access to customer information to influence repurchases and keep them for life.” Mr McCabe expects some carmakers will control the major cities “either by joint ventures or outright ownership”. He added: “Some of them are doing it quietly by taking properties, but they will only own individual dealerships, not entire networks. Some may take minor stakes, possibly 10% shares in dealer groups, but most dealers will remain independently controlled.” Manufacturers want more control over their distribution networks because next year's Block Exemption review is likely to open the retail market to greater competition. Dealers are pressing for five-year contracts, pointing out that they are expected to invest millions of pounds in premises but carmakers only had to give a maximum of two year's notice. Mr McCabe said: “The UK will become similar to the US – it will be much harder to sack a dealer, they will have to be bought out.”

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