Dealers asked to ante up

Will and will nots
Aston Martin-Jaguar-Land Rover says it will
  • Add stores, including service-only points
  • Ask existing dealers to add related brands and more than double sales It will not
  • Force mergers or new construction
  • Help pay dealers' expansion
  • Undo exclusive Jaguar and Land Rover showrooms

  • Mike O'Driscoll, president of the newly merged Aston Martin-Jaguar-Land Rover group, wants dealers to build almost 40 percent more U.S. stores, including some service-only points. But that will be easier said than done.

    Real estate can cost $1 million dealers say, and others have large mortgages on existing stores.

    Parent Ford Motor Co. merged the U.S. operations of the three British brands within the Premier Automotive Group, effective Saturday, Sept. 1.

    While keeping showrooms and other customer-facing areas separate, the merger's purpose is to reach goals that would have been harder for a

    solo brand:

    n Higher sales per dealer

    n Greater geographic coverage in areas of the Midwest outside Chicago

    n Economies of scale, for dealers and the distributor.

    But combining dealers will not happen soon. The first impact will be in markets where one brand is absent or under-represented. In the traditional luxury-import markets of New York, Los Angeles and Miami, dealers may not feel changes.

    O'Driscoll, said he will not force dealers to merge or build stores. Nor does he plan to assist dealers financially, he said.

    "About 30 percent of our volume base is already shared," he said. "We will only do this (merge ownership) where there is certainly a compelling business proposition. We have no plans to invest our capital into making it happen. We're best off leaving the dealers to handle the retail environment," he said.

    Expensive proposition

    Higher sales may help dealers justify the expense of adding Land Rover and/or Jaguar stores. In expensive markets, such as New York's Long Island, a new store can cost $1 million just for the real estate, said Mike Lazarus, co-owner of Long Island Auto Group (Jaguar-Land Rover-Porsche-Saturn-Volvo) in Amityville, N.Y.

    Dealers said Jaguar and Land Rover will not combine showrooms, but some functions could be combined, out of the customer's sight.

    By combining dealers, Aston Martin-Jaguar-Land Rover says it will climb the sales-per-dealer chart. Jaguar and Land Rover are far behind rivals Lexus and Mercedes in sales per dealer. Lexus was No. 1 in the industry in 2000, at 1,170 cars and light trucks per dealer, compared with 663 for No. 2 Mercedes; 312 for Jaguar; and 221 for Land Rover.

    But after years of pushing for exclusive stores, it is ironic for the manufacturers to talk about adding franchises, said Nelson Andrews, co-owner of Land Rover Nashville, in Brentwood, Tenn.

    "My first reaction was, 'Wait a second, I still have a mortgage on this thing!' " he said.

    Double the volume

    There are 131 Land Rover dealers in the United States, 147 Jaguar dealers and 15 Aston Martin dealers. Spokesman Simon Sproule said 40 U.S. dealers have at least two of the three British franchises, mostly Jaguar and Land Rover.

    Vic Doolan, Premier Automotive Group's executive director of North American marketing and distribution, said the company expects all three brands combined to sell about 140,000 new vehicles annually within about three years. That would be more than double the 2000 total of 70,876.

    He said the combined brands need 200 stores nationwide, largely owned by the same dealers that have those franchises. That could include service-only points.

    Premier Automotive Group's other brands, Volvo and Lincoln, are not part of the British-brand merger. But all five brands will share all or part of some in-house functions, such as information technology, finance and human resources.

    But even in the best of circumstances, it will take years before Premier Automotive Group and its dealers can save money by sharing service and parts among the different brands.

    Said dealer Lazarus: "It could take a decade to make it work."

    You can reach Jim Henry at autonews@crain.com

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