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Carmakers eye dealers for profit chop

Carmakers are looking to ‘chip profit’ out of their distribution networks in order to slash costs.

Speaking at AM/RMIF autoretailing 06 conference in Birmingham, Max Warburton, motor analyst at UBS, warned dealers of manufactures struggling to cope with massive legacy costs, over capacity and rising commodity prices, as well as the threat from emerging markets and attempts to meet ambitious promises to shareholders. He said manufacturers believe that dealers are making too much money at their expense, and are intent on ‘chipping profit out of the distribution network’.

‘The car makers’ belief that dealers are making too much money is a wake-up call to the retail motor industry,’ said Matthew Carrington, chief executive of the RMIF.

"This view is extremely disturbing and highlights the huge void between manufacturers’ understanding of their networks and the stark reality that dealers have to face every day," says Carrington.

"That reality is that the current franchise model will not bear yet more pressure. Manufacturers already require overwhelming investment from their networks to meet dubious standards demands and, with average retained margins of just half a per cent, UK dealer profitability is already at its lowest ebb.

"The role of the RMIF has never been more relevant than it is today. These are turbulent times for dealers in the UK but there is strength in numbers. Together we will step up to the challenge to bridge the gap in manufacturer understanding and, by bringing the focus back to partnership, return stability to the retailer network.”

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