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Peugeot to reduce network after sales structure review

Peugeot is to reduce its franchised dealer network from 295 outlets to "between 260-270" after completing a comprehensive review of its national sales structure.

Dealers who will no longer stay with the franchise have been notified verbally and will receive official confirmation by letter before the end of this month. They include single sites and some outlets owned by larger groups.

Although Peugeot's seven-year fixed sales contracts require the carmaker to give a one-year notice of termination, it has decided to give dealers two years' grace, which takes the company up to the next Block Exemption Regulations in 2010.

Peugeot also has a number of dealers on two-year rolling contracts, also with two-year notices of termination. Under BER 2003, manufacturers issuing fixed contracts had to give a minimum term of five years; therefore, since May 2005, Peugeot switched to rolling contracts to ensure all contracts ended in time for BER 2010.

The carmaker intends to wait for the BER 2010 ruling before it decides whether to favour fixed-term or rolling contracts in the future.

Rod Philpot, Peugeot UK network development director, said the move was intended to set Peugeot’s network up for 2015. He said the carmaker had been in discussions with the national dealer council about the changes since spring last year and had spoken to every dealership in the network this year.

"It’s a chance for us to take a long-term view and to talk to dealers about their plans and our plans,” Philpot said. “We based our decisions on geo-demographic analysis on where we need sales points. Around half of those that are being terminated are in the wrong area."

Philpot admitted that the majority of those dealers are also unprofitable.

As part of new contract terms, every dealer in the network will be expected to meet ‘Blue Box 2’ standards. At present, 123 of the 295 dealers have the full Blue Box showroom identity, which includes the extensive blue cladding which created controversy and an OFT investigation after the scheme was launched in 2003.

Blue Box 2 tones down the cladding effect; showrooms will have blue frames and strong entrance features with prominent Lion logo. The interior requirements remain the same.

All dealers will be expected to meet Blue Box 2 standards by May 2010. Peugeot does not anticipate any conflict with the Office of Fair Trading ruling in August 2004 which stated that dealers did not have to invest in Blue Box.

“Our understanding is that there is no reason to be concerned,” said Philpot.

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