A ‘false economy’ which has seen the UK’s car retail sector deliver on pent-up demand from the COVID-19 lockdown is masking the true extent of impending redundancies in the sector, Pendragon boss Bill Berman has told AM.
Speaking to AM following this morning’s announcement that the former AM100-topping car retail group will make 1,800 redundancies across its business – including the closure of 15 retail sites – the Pendragon chief executive said that “things are going to look very different” by the end of 2020.
“We’re living in a false economy to some extent,” said Berman. “The sheer amount of redundancies that are going to happen just haven’t hit the market yet.
“The Government furlough scheme has been a great help and the recovery of the sector post-lockdown has been phenomenal, but after you get through October and all these redundancies hit things are going to look very different.
“With Brexit concerns, which will also have a high impact on certain car brands, things could look very uncertain for some time to come.”
Earlier this month Lookers announced its plan to axe 1,500 jobs as it looked to cut costs in-light of the COVId-19 pandemic, while yesterday (July 29) Imperial Cars revealed its plans to make redundancies.
Today, Berman told AM that around half of the 15 dealership closures that will be implemented across the Pendragon group had been done so “with the OEMs co-operation” and in-line with their plans to reduce their footprint and improve viability.
He said that the decision to axe 1,800 of the group’s workforce had been an emotional one, however.
“The hardest thing is that there is a human element to this,” he said. “There are no easy decision to make. It’s a case of looking at 6,000 people and giving them the ability to thrive and exist in the market that we exist in today and unfortunately that comes at the cost of others.”
Pendragon’s leadership was already planning a review of its UK operations prior to the COVID-19 pandemic, as Berman communicated to AM in an exclusive interview prior to the crisis.
A streamlining of the group’s CRM systems and other processes delivered improvements following the easing of lockdown measures in June and Berman said that the average sales executive was now selling 15 to 20 cars, as opposed to 12 to 15 prior to the crisis.
However, he said that the business needed to shed roles which could be considered “a luxury” or “a nice to have” to survive and thrive in “the new normal”.
The group’s new structure will undoubtedly have been affected by an ability to complete new and used car sales 100% online.
Yesterday Cazoo confirmed that it had entered consultation over redundancies – believed to be around 300 – among staff of the Imperial Cars car supermarket business, which it acquired just a fortnight ago, over redundancies that come as the business moves towards a more digital-led sales model.
Berman said that Pendragon had completed 3,000 car sales during lockdown, the vast majority of which had been completed “completely online”, with a home delivery.
Since the easing of lockdown restrictions he said that around 20% of the group’s sales had been completed in the same way.
Sceptical about digital retail
Berman remains sceptical about the long-term growth of online car retail, however.
He said: “I look at the digital sales process the same way I look at electric vehicles (EV). It’s inevitable. Adoption rates are currently stagnant, anaemic, though, despite all the specialist centres and infrastructure that’s been put in place and I see the same thing happening with the digitalisation of the sales process.
“We’ve going to have it and push on it but we are going to have to sell cars the way our customers want a to be sold to and if that means going through the 10-step face-to-face sales process that we had 20 years ago then we have to be able to provide that.”
Commenting on suggestion from Marshall chief executive Daksh Gupta that a breakaway pack of top AM100 retail group’s could soon dominate the UK sector following the impact of COVID-19, Berman said that some would grow and others would focus on a smaller footprint with successful brands.
But he insisted that Pendragon’s long-term focus remained on growth.
“I’ve no plans to get any smaller,” he said.
"If I could open another 10 Porsche Centres of 20 Ferrari stores I would. I want to grow. Even if that means we invest in Pinewood to leverage that digital side of the business, the aim remains to grow.”