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MG Rover buys dealerships

MG Rover has bought nine of its UK dealerships in a bid to maintain market share until an expected alliance with a Chinese group leads to more new products.

The dealerships, branded Phoenix, control sales in the 20 core marketing areas the manufacturer believes it has to protect and include areas with substantial discounted employee sales.

MG Rover is a few weeks away from completing a detailed survey of its 265 UK dealers who are experiencing a tough time. The manufacturer’s market share has fallen this year (from 3.91% to 3.28%, first-half, year on year) and margins are thin because of heavily-marketed cashback deals.

The latest edition of Sewells Who Owns Who? reveals that Phoenix Venture Motors (PVM) has dealerships at Rednal (Birmingham), Bromsgrove, Chorley, Coventry, Hatfield, Kidderminster, Muswell Hill (North London), Northampton and Preston.

PVM is a subsidiary of Phoenix Venture Holdings, the group that includes MG Rover, the manufacturer. Mike Ashley, previously with Fairways, the South-east dealer group, is chief executive of PVM whose other directors (both non-executive) are Bob Neville (former Rover finance director) and Robert Jackson, who built the Horner group. Guy Pigounakis, MG Rover director of franchising, says: “We have not set out to develop our own dealer network, and acquisition by PVM is a last resort when a dealer goes out of business or refranchises.

“I do not expect us to get to 20 PVM dealerships, and the intention is to sell them to independent dealer groups when they are ready. Our retail review is suggesting that MG Rover should have between 250 and 300 outlets, though we may find that some are in the wrong place. In that case, and if the dealer decides to go, we might not replace them.”

PVM was created four years ago following the collapse of SGL, the Lancashire group, which had MG Rover dealerships in Preston and Chorley, each supplying around 1,000 cars a year to British Aerospace. In March, PVM created Phoenix Hatfield after Diamond Rover was forced into liquidation.

Phoenix Coventry replaced a Quicks Rover outlet on a prime 3.5-acre site at Coventry, part of MG Rover’s heartland, and selling about 1,000 discounted cars annually to group employees. CD Bramall (now part of Pendragon) acquired Quicks but did not want the site because of the high overheads and low returns.

MG Rover also needed to prevent erosion of sales in the employee heartlands of Rednal, Bromsgrove and Kidderminster.

Richard Cort, chairman of the MG Rover dealer council, says: “We would prefer independent dealers to represent the manufacturer but we are not hostile to the company owning outlets where it has a difficulty finding the right retailer.”

Most of MG Rover’s dealers remain loyal and are hanging on, hoping for better times ahead. In confidential briefings, they have been told to expect an announcement this autumn that the manufacturer lost around £100m in 2003.

Professor Peter Cooke, head of Automotive Industry Management at Nottingham Business School, says: “Independent dealers are better than manufacturers at understanding their local market conditions. If manufacturers have to own outlets, it is always best if this is done at arms’ length.”

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