F&I Management & Training

There have been some high- profile casualties of late, with last month seeing the closing of the Casey Group, a major midlands motor dealership, with the loss of more than 60 jobs.

That closure came just two months after the collapse of the Galway-based Tom Hogan Motor Group, with the loss of 190 jobs. With autumn traditionally being a particularly lean period for sales even in prosperous times, few are confident we have witnessed the last of the high closures in an industry where it’s all about survival.

One dealership that didn’t survive was White Bishop cars in Dublin 12. The Opel dealership went into liquidation earlier this year, but dealer principle Pat White is back in business, albeit at a smaller scale with Pat White cars, across the road from the now empty 11,241 sq ft showroom.

“We could see what was happening in the late 1990s, that the pressure was coming on to make the bigger showroom – the glass palace,” says White.

“In 2000, we were a small Seat dealer on the Drimnagh Road and we had sold 640 new cars that year. Over the years, we have sold 5,000 Seats, and we were forced to move with the standards that were set. So we looked around and we saw properties for sale on the Long Mile Road and then we bought the showrooms.

“Then a very large premises came up – which was the former OHM premises. And then after talking to Opel, they produced plans and told us that we would have to build a certain type of showroom, so we added €2 million on to our mortgage and built the new premises.

“We have been in the business for 25 years, we did everything right, there was no sharp practice. But to keep up with the standards, it put severe pressure on the company, and when the recession kicked in and the Green Party messed with taxes they knew nothing about, that was the icing on the cake.”

Changes to the VRT and road tax systems – to an emissions-based system – were announced in late 2007, but they weren’t introduced until July 2008 and this, in part, according to White, was a reason for the sharp drop in sales.

The seasonal time for buying cars was destroyed. There was total confusion. People held back and the cars that we sold in July were only the ones that we should have been selling in January of 2008. Many other people said they wouldnt buy a car mid-year, and then, in October 2008, we were in the full grip of a recession.

With a combination of a poor 2008, then the onset of a recession coupled with the huge costs associated with running a large dealership, the pressure on the business became a little too much.

“It is very hard thing to put your company into liquidation. We tried everything we could to prevent it, from selling off property and stock, but the company was like a leaking sieve. We were pouring money into it.”

This, however, wasn’t enough to beat White, who decided quickly that he would return to business. “I said, ‘to hell with it, I am going back and I am going to work’. White Bishop was gone but I was going to put my own name on the door.”

White asserts that more must be done by the Government to help businesspeople get back on their feet. “I think it should be a moral obligation for governments and banks to let people get back into business. When you do try to get back in, it is difficult because there are always question marks over your name and you have to open up new bank accounts and start again.

“I want to get back into business to put food on the table and pay my debts. When you close down, you owe people a lot of money and the only way to pay them back is to get into business. I took my medicine, dusted myself down and got back at it.”

White had 60 people working for him in the old premises, but had to make the difficult choice to bring just a handful. “I took five people with me, I’d love to bring them all, but I can’t. We are coming back in a small way doing servicing, we are selling second-hands and we are fighting back and we want to get back there.”

The demands being put in place by some manufacturers on dealerships are being blamed for putting car dealerships under financial pressure.

The motor industry block exemption is a set of EU-based rules that define the legal relationship between manufacturers and dealers in terms of how they sell, distribute, service and repair new cars.

It also relates to after-market provisions such as the supply of spare parts and technical information. The industry’s block exemption was last renewed in 2005. Under block exemption, car manufacturers can protect their brand image by requiring their vehicles to be displayed in a “brand-specific” area of the showroom, and it has been many of these requests, as well as perhaps vanity on the part of some motor dealers, which has added to the financial burdens.

“I’m not sure it was vanity,” says Paraic Mooney, owner and chief executive of EP Mooney Ltd. “We were set out a certain amount of guidelines and we adhered to them, but this applied to everyone. We all tried to do the best we could. Despite the facilities that we all offer, which you really do need to have in order to offer a proper service, the market simply isn’t there. We are planning for a similar year to this year in 2010.”

One dealer principle from a prestige brand, who didn’t want to be identified, told The Irish Times he was upset at the unreasonable demands being put in place by the manufacturer. “Having spent €3.5 million on a premises several months ago, I am now being asked to build a new standalone premises at a cost of €5.5 to €6 million. This is totally unreasonable.”

With conservative estimates of 55,000 car sales in 2009 and little prospect of a huge jump in 2010, it would appear likely that there will have to be a revision of operations for many car dealerships in Ireland.

White has a view. “I think a market of 150,000 cars would have kept a dealership like mine going, but it isn’t there. There are an awful lot of good people in the motor trade and they want to make a living. A lot of things have to change – the bank’s attitude for one and the negative equity out there in cars – and the Government needs to start listening.

“The Government put me out of business and before Christmas there is going to be a lot more going out of business. The Government need to stop playing with taxes they don’t understand. They kept taking the golden eggs and now they have killed the goose. Now they have killed the motor trade.”

A SALES campaign is underway to find buyers for garages in Galway, Ennis and Clonmel following the closure of the Tom Hogan Motor Group. DTZ Sherry FitzGerald is guiding over €15 million for the various properties, which are for sale in one lot or on an individual basis. But what about

many of the other premises to let around the country, what can be the future for these?

According to one property expert: “There was pressure to develop large showroom and now the car market has collapsed as well as the commercial market. There is so much glass in them that invariably they have to be redeveloped. Any of the electrical people could make use out of some of these car showrooms, but in most cases the showrooms can be incorporated into a larger development.”

Paraic Mooney has mixed experience of late with leasing premises. “We have successfully leased two premises to other car dealers, but we still have another which is proving a little slower to move. The difficulty is that it is possible to turn many of these showrooms into retail premises but retail is dead – it is on its knees,” says Mooney. “Each premises varies slightly according to its title, but in most cases it is reasonably easy to offer at least part of an existing car showroom as retail space and the rest as warehousing and storage. In some cases you do have to apply for planning again. There are different parameters in many cases.”

This article appears in the print edition of the Irish Times
DATED: 24.09.09FEED: Irish Times