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MGR gloomy on loss cuts

MG Rover is blaming the rise in dual-brand showrooms and network restructuring for its sales slump in the UK. Year-to-date sales are down 19.5% at 63,599 units.

Guy Pigounakis, MGR director of franchising, says retailers “lose focus” when they accommodate more than one franchise under the same roof. Almost 60% of its 265-strong franchised network is dual-brand. MGR is looking to fill 35 open points, but while its preference is for solus sites, Pigounakis acknowledges the marque has appeal as a second franchise.

““If asked for a preference over solus or dual franchise outlets I would have to say solus,” he says. “But equally, we’ll look to fill any open point with a solus or dual franchise without any qualms.”

Collapses and dealers giving up the franchise have forced MGR to set up its own network of nine outlets to maintain coverage in key areas.

MGR chief executive Kevin Howe says the reorganisation, plus an increasingly competitive market, resulted in a drop in turnover from £1.741m in 2002 to £1.671m last year. The company did cut its losses, however, for the fourth consecutive year since Phoenix Venture Holdings took ownership. The Longbridge-based carmaker, which has been in the Court of Appeal this week on redundancy issues, reported a £77m loss for 2003, compared to £95m losses in 2002, and a £187m deficit in 2001. However its management has warned that further improvements are unlikely this year.

“Turning to 2004, lower vehicle sales, particularly in the UK where MG Rover continues to concentrate on profitable business segments, and the need to continue dealer recruitment on the Continent, will make it impossible to continue to reduce its losses,” says Howe.

Production is well short of Longbridge’s breakeven point of 180,000 units. In 2003, it manufactured 132,789 cars and sold 144,900 (down from 148,500 in 2002). This decline continues in 2004.

In the UK, Rover sales have nose-dived by 23%, MG by 14% – a serious issue as domestic sales account for 70% of total volumes.

The manufacturer is still heavily dependent on negotiating agreements with other carmakers in order to secure its future.

MG Rover has already received an initial tranche of funding from Shanghai Automotive Industry Corporation (SAIC) since signing a strategic partnership agreement in June, and it is confident of a full joint venture agreement being ratified early next year.

“Once the SAIC agreement has been approved we can expect renewed confidence in the future of the group and the continuation of MG Rover vehicle production both at Longbridge and elsewhere in the world,” adds Howe.

This week, the Court of Appeal started considering whether MGR can lay off workers without having to offer early retirement under the “collective agreements” between the carmaker and the unions.

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