We have been advising several large motor manufacturers and/or their finance arms on problems they have had with their dealership networks. This has been successful where, working alongside the manufacturer and the financier, we have been able to use restructuring processes, both outside formal insolvency (including solvent liquidations) and involving formal insolvency processes, to return funds to the secured stakeholders as well as unsecured creditors. In almost all cases early intervention was an important prerequisite.
The highest unsecured payout to date has been 40.4p in the £. In most cases we have helped, alongside the manufacturer, to retain the dealership presence for the network and many of the accompanying jobs. There is often a long-standing relationship between brand and dealership which can mean loyalties can be helped to endure even after restructuring through a formal insolvency process. In many cases these loyalties on both sides enhance what is a difficult process and ultimately help lead to a successful outcome.
The motor industry continues to suffer with the difficult economic climate, the increase in VAT, the end of the scrappage scheme, the loss of consumer confidence and the high cost of fuel at the pumps all collectively delaying or changing buying decisions. A further significant problem is that of high rents in the South and South East eroding margins further in those parts of the country. Early dialogue can help in this regard if sensible proposals are put to the landlord. However, this has to be done carefully, addressing the risks of the landlord's possible actions if rent is outstanding. A restructuring process may be called for if appropriate.
The larger volume manufacturers have had mixed results. BMW has managed to increase sales by 14.5% to 31 August 2011 over the same period in 2010, while Ford's like-for-like sales are down to 171,000 units from 184,000. Vauxhall has sold approximately 151,000 units, down from 156,000 in the same period. Overall, new car sales are down by 6.14% this year over the same period in 2010.
The industry continues to innovate and change following on from the growth of large car supermarkets. Tesco has now entered the fray with its own used car website and a number of consolidators are buying up poorly-performing dealerships. With low margins in new cars, dealerships continue to look for new ways of generating margin as well as the established ways such as selling secondhand cars, arranging finance and servicing. Websites continue to develop with the ability not only to view videos of many brands online but also to order your entire specification car online.
We expect much of the industry will continue to face tough times until the economy improves significantly. We are therefore on hand to work with our clients (dealers, manufacturers, other stakeholders or preferably all) specifically to produce an agreed optimum way forward both outside and, where necessary, through a formal insolvency procedure. Our 'roadmap' approach sets out the financial position of the company, reviews the solvency and business model and also the stance of the major stakeholders. It identifies where respective interests lie and outlines the best options. We then help to implement the roadmap as agreed by all parties to produce the best possible result.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
