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HR Owen close to selling franchises

Nick Lancaster, who forecasts a radical shake-up in UK franchised motor retailing, says the disposal of three or four of HR Owen’s “brand groups” should be finalised by early spring.

Industry speculation suggests the group’s four BMW/Mini dealerships have already been sold but the chief executive says: “Nothing has yet been finalised but everything is going according to plan.”

The new-look HR Owen, which follows a complete review of the business, will be clustered around the profitable specialist division which includes Bentley, Rolls-Royce, Lamborghini and Bugatti.

Lancaster is committed to DaimlerChrysler (he has four Mercedes-Benz outlets, two Chrysler and one Smart), Audi (four centres) “and a few others”. He also holds five Volvo, four Land Rover, two Jaguar, two Lexus, one Seat and four Volkswagen, plus one VW van.

Rising costs make profitable trading in volume brands increasingly difficult in London and other areas, including the Home Counties, says Lancaster.

“Manufacturers are doing nothing to help dealers, who must operate on the same margins wherever they have their sales points,” he says.

“This is not sustainable long-term but manufacturers seem to be doing nothing about it.”

Lancaster believes new ideas tested in other countries could be tried in London and other high-cost areas of the UK. In New Zealand, Honda terminated its dealers’ contracts, took over retailing and appointed aftersales retailers. The market is influenced by imports of used cars from Japan.

“Honda sets its own prices in New Zealand and varies them according to the strength of the market,” says Lancaster. “It now has the largest market share, highest volume of new car sales and best brand profitability.

“The same approach, or something else new, could work in the UK. The problem for car manufacturers is that it needs to be pan-European.”

HR Owen’s rethink follows a swing from profit (£2.3m in first-half 2004) to loss (£7.3m in the first six months of this year).

Announcing the latest results in September John MacArthur, the group chairman, blamed a subdued UK economy, a poor UK new car sales market and high running costs in the south east. The group also predicts a loss for the second half of the year.

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