Car Dealers - Interesting Times

Interesting Times for Car Dealers

YESTERDAY'S rise in interest rates is a further cost increase, not only for house-owners but, also, for car dealers with mortgaged showrooms. It is a reminder, should it be needed, of the narrow difference between a dealer's profitability and a loss. The UK base rate is now at its highest since February 2001 and, worryingly, some economists today are predicting base rates could soon rise to 6%. Yesterday's increase was primarily because of rising inflation, both in the Consumer Price Index and because of concern over wage inflation. With Britons in more debt than ever, dealers will be hit on two fronts with this fifth rate rise in less than a year. Motorists will be have to put all their spare cash (which may otherwise have gone towards a different car) towards paying their increasing mortgages. Fewer customers will mean less revenue from the sales floor and less of the wherewithal for paying-off the dealership's own rising interest on borrowings. The latest rise, even coming as it does after a solid sales month in June, should not be underestimated. Understandably, fingers will be edging closer to the panic button. The point of the rate rise is primarily to arrest the non-stop rise in house prices and make such high prices unsustainable. The worst scenario is that anyone buying a house now, whilst prices are high, could find that within a year, the value of the asset is lower. The repayments will be higher; negative equity could erupt again and re-possessions will rise. There will be no money left for cars - but there may well be some house bargains to be had. For UK car makers supplying the American market, the outlook for exports, looks as dismal as the British weather. It is now costing Americans over $2 to buy £1-worth of a Jaguar or a Land Rover That is the most since 1981. It will be a good time to take a holiday in the States, if you can afford it. Life's a bitch sometimes, but only if you let the belt out.

2. Stop the presses I WOULD feel slighted if I were Bristol Cars. Thieves go to the trouble to kit themselves out with a crane and two lorries in order to break into the factory ... and they steal the presses and leave the cars. The presses were used to make body panels for the Blenheim range of coupes. I admit it is an ugly car (a little like a 30-year old Capri, but without the good bits), but the presses are no things of intrinsic beauty, either. The newish Bristol Fighter is far more beautiful. When the thieves comprehend what unsightly shapes these presses produce, they'll return them; COD, of course.

3. Vardy versus Vertu There was a painful element to Wednesday's deal in which Peter Vardy Ltd took-over the BMW and Mini franchises of the John Martin Group in Edinburgh. Peter's father, Sir Peter Vardy, has been friends with John Martin for many a year. "I am aware, that as John has handed this dealership over to my son he would, and should have, been handing it over to his own son, John, who very sadly died just over two years ago," said Sir Peter. John Martin Jnr died of a heart attack while playing football in November 2004. It was after this tragic loss that John Martin Snr took the decision to restructure his retail motor empire to concentrate on a reduced and select number of manufacturer relationships. Peter Vardy Jnr, who attended Loretto School just along the road at nearby Musselburgh, and for a period managed Edinburgh Jaguar with Rossleigh, said there were exciting plans for the operation on Seafield Road. It represents not only 'New Vardy's' first move into the specialist car market but also its arrival in Edinburgh. BMW can definitely be looked upon as a feather in the Vardy cap. It shows the maker has bought-into Vardy's plan to give his general managers a stake in the business. That, and the Vardy name and financial backing available to Vardy the Younger, will see other manufacturers open to approaches from this 1-year old retailer. Last December, Vardy decided to advise all car-makers about his Managing Partner scheme. The fact that only two car-makers did not respond suggests that others, apart from BMW, may have opportunities for the 28-year old. It will be interesting to see whether Pendragon ( Evans Halshaw ), Lookers, or the other new kid on the block, Vertu, get the same chances. Click here for Wednesday's story

4. Motormen's Mottoes LAUNCHING HIMSELF upon us from behind his school motto, prime minister Gordon Brown told us `I will try my utmost' . It prompted me to see if I could find the school mottos of some of our prominent industry figure-heads. I was expecting Trevor Finn's old school, 'Wolfreton' in Hull, to have something like 'Ready, Aim, Fire' as its maxim. In fact it doesn't have a motto, only the dreaded mission statement: "Wolfreton: a caring community where learning is a foundation for life". I had better luck with former dealer magnate, Sir Peter Vardy. Not only does his old school have an epigram but, it is also in Latin. 'Floreat Dunelmia' is the motto of Durham School, the early learning centre of Sir Peter. Translated it means 'Let Durham Flourish'. Since his new Vardy Group (Vardy Venture Capital, Vardy Property Group, Peter Vardy Ltd, the Vardy Foundation and the Emmanuel Schools' Foundation) is headquartered in the City, he's doing his bit. Some would say that Gordon Brown should do something similar and set-up his headquarters in Kirkaldy Scotland, home of the motto-bearing Kirkaldy High School. I think the school should change its motto in honour of its most famous pupil. How about 'Furtim est sacrosanct' -'Stealth is sacrosanct'.

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