Entrepreneur or handyman?

New standards make the automotive trade more difficult

Frankfurt. The new block exemption standards should have made auto dealers more independent. But the reality is that manufacturers' dominance is increasing.

"The trade has not yet exhausted all the possibilities it has with the new block exemption regulations," said Juergen Creutzig, president of the European dealer association Cecra, during the "Aral forum 2004" at Automechanika here.

Some 21,000 German authorized dealers are floating between two poles: ''manufacturer's handyman and independent entrepreneur.'' This is how Willi Diez of the institute for the automobile industry, who chaired the discussion, described the relationship between manufacturers and dealers.

Creutzig believes that the new block exemption has strengthened manufacturers' dominance rather than reduced it. He said, "In practice the new rules are often being evaded."

He said that more than 3,000 complaints have been received in Brussels regarding manufacturers' attempts at interpreting the block exemption rules to their advantage.

Creutzig said: "With the old block exemption we had only 10 percent of the problems we have now."

The criticism mostly regards cost increases and often absurd standards.

Dirk Weddigen von Knapp of the VW-Audi dealer association said: "Contracts with an exaggerated number of standards are loathed by anyone who's aim it is to sell." He said that the administration work involved uses up to 60 percent of the working time. "That way our business is not profitable in the long term," he said .

Audi sales director Stefan Mueller admitted that mistakes were made. "We have gone too far with some standards." He also said that the bonus system is partially incalculable for the dealers. The aim should be for manufacturers and dealers to "earn money with as little bureaucracy as possible."

Permanent learning process

Wolfgang Schrempp, head of DaimlerChrysler Italy, wants "as little regimentation as possible." He said that only then would the automobile business remain profitable for both parties.

He rejected one-sided apportioning of blame. "Selling is a permanent learning process. Insolvency can have many causes and some of them might be coming from the dealers themselves."

One of the opportunities afforded by the new block exemption is multi-branding, which is not always welcomed by the manufacturers.

However, the situation is different at the Lueg Group in Bochum, one of the largest German Mercedes-Benz dealers. "The manufacturer itself has initiated our entry in the multi-brand trade," chief executive director Alexander von Gizycki explained. Now the company also sells Ferrari, Maserati, Opel, Saab and Suzuki and , starting in October, Volvo and Hyundai, beside the group brands.

Ulrich Fromme, mono-brand dealer and Smart dealer spokesman, believes that there are expansion opportunities when looking at internationalizing the business. "Our problem is the location Germany," he explained. He said that he hardly made any money in Germany during the last two years. "Meanwhile we are also selling cars in Austria and in Slovakia," he said.

He said that manufacturers started working on an international basis a long time ago and now the dealer associations are also being challenged. Said Fromme: "We have to talk about Europe and not just about Germany."

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