The Birmingham Post’s high-profile campaign to support Jaguar Land Rover has brought the plight of the West Midland automotive industry into sharp focus. Here, two businessmen working in automotive retailing discuss how dealers can survive the crisis.
Roger Parsons, a partner at chartered accountants Clement Keys, and Ken Forbes, chief executive of Meteor Group, which operates in the Midlands as Mercedes-Benz dealer Drayton Group, believe the Government must provide financial support to JLR otherwise the consequences for the West Midlands car industry will be catastrophic.
Mr Forbes said: “Manufacturers are suffering and there is no doubt they need assistance but they in turn need to provide practical help for dealerships trying to survive the downturn to protect the huge number of jobs involved nationwide.
“Things are very tough; our new car sales in the last two months of 2008 were down 45 per cent compared to 2007. Increasing stocks of unsold new cars restrict further production and also delays the introduction of the greener cars that are in the pipeline. New models from Mercedes-Benz will show some dramatic reductions in CO2 but we will see the benefit only when the cars are actually in use on the roads by business-users, replacing older models.”
Established in 1924, Drayton Group is a third-generation business with 80 years’ experience in motor retail so the business is no stranger to recession.
“What is different about this situation is the speed at which it has happened,” Mr Forbes said. “We have had to deal with a double blow, first the financial crisis and then the recession.”
Taking up the point, Mr Parsons said: “The economic climate is very challenging for SMEs [small and medium enterprises]. The collapse of the banking system and consequent reduction in the flow of money is crippling good businesses. They have to contend with a severe lack of cash that would normally keep their businesses afloat and are also facing drastically falling sales.
“The summit between business minister Lord Mandelson and the Society of Motor Manufacturers and Traders (SMMT) which was held last year was welcomed but we have not seen enough action resulting from this meeting.”
Mr Forbes said: “The Government must address the problems of liquidity and find some ways to restore demand. The Chancellor’s pre-Budget statement did not offer any real help and the delay in coming to a decision on JLR does not inspire any confidence that the people who make policy decisions at Government level have any real understanding of the difficulties that business face.
“For example, the decision to reduce VAT by 2.5 per cent was welcome but, by deferring for a week, the Chancellor put on hold any potential customers who delayed buying decisions until the rate came into effect. This could have been avoided by making the change effective from midnight on the day of the announcement and stimulating some immediate activity.”
Mr Parsons believes that managing costs and reducing overheads is key for any SME, along with a streamlining of all areas of the business. “The management team at Drayton Group have always focused on running an efficient business, even in the heyday of the industry when things were very different and other dealerships may not have paid so much attention to cost control.”
Mr Forbes appreciates that, while some things are outside of their control is it important to address those that can be influenced. “We have put in place additional controls and introduced a number of initiatives to help us manage our way through this difficult period. We monitor our cost base on a regular basis, have looked at improving all of our purchasing deals and are also working with other dealers to look at opportunities for bulk purchases where appropriate.
“Like many other businesses we have also had to look at our staff costs.
“We have maintained an open and honest dialogue with our employees throughout and undertake regular staff briefings to discuss our strategies for the future. Together we can identify all opportunities to change and improve.”