LONDON - British Car Auctions, long the dominant player in the wholesale used-vehicle auction business in the United Kingdom, faces an unprecedented threat to its position.
Manheim Auctions, North America's richest and most powerful auction company, has entered a partnership with Independent Car Auctions in Bristol, England, to form ICA Holdings. In the past two years, ICA has bought three other United Kingdom auction companies so it can challenge British Car Auctions, which has 23 auctions.
The battle lines are drawn. At an Oct. 3 management conference, a memo distributed to British Car Auctions managers told them 'how we intend to deal with a challenge to our leadership of the UK auction market.' The memo warned: 'We will need battlers ... who are prepared to go to the wire to protect and enhance our business.'
PRIZE: THE CONTINENT
The battle is over much more than just the United Kingdom. Both companies know a larger challenge awaits across the English Channel in continental Europe. Mainland Europe does not have an auto auction tradition, so the two competitors must establish an industry there. It is a used-car market potentially as large as North America.
British Car Auctions has been the pioneer on the Continent, having invested £35 million (about $58.2 million at current exchange rates) since 1989 to open auctions in Belgium, Denmark, Holland and Germany. BCA, the acronym by which the company will be known on the Continent, will open a seventh auction, in Neuss, Germany, in June.
ICA has been busy absorbing the smaller British companies it bought in the past two years. All 17 auctions in the group soon will be rebranded with the Manheim name.
Once its new United Kingdom auctions are absorbed, Managing Director John Bailey said ICA will turn its full attention to Europe. Although the ICA group operates no auctions on the Continent yet, Manheim has the money to back up its ambition. The partners plan to be operating in two or three European countries by the end of 1999, he said.
WHATEVER IT TAKES
Both competitors say they are prepared to spend whatever it takes to establish themselves on the Continent.
The contrast between the two chief executives is dramatic. British Car Auctions Chairman Tom Gibson, 59, is a tough, wily Scot with a commanding presence, a veteran of nearly four decades as a dealer and an auction man. ICA Managing Director John Bailey, 38, is a boyish executive whose laid-back manner fits with Manheim's decentralized style.
Said Gibson: 'We're moving ahead in countries where there's no auction culture, no used-car culture and different languages. It's bloody hard work to create the environment and overcome the barriers.'
One problem is finding locations for auctions.
'We in the auction are land-hungry animals,' said Gibson. Indeed, auctions require lots of real estate, but they don't create a lot of high-paying jobs. Therefore local planning authorities often view them with suspicion or outright hostility.
Said Jonathan Brown, an analyst with the Harbour Wade Brown consulting firm who has studied the used-car market in Europe: 'The challenges the auction companies face vary widely. We are not and have never been a single market. It's as simple as that. It will take generations before it becomes anything closely resembling one.'
Bailey said the entry into European countries will be capital intensive.
'It will require a long-term strategy and deep pockets,' he said. 'We, of course, are fortunate we have both.'
With more than 60 auctions, Atlanta-based Manheim is more than twice as big as its nearest competitors.
Gibson said the ICA-Manheim partnership is welcome to have a go at Europe. Based on his experience there, Gibson thinks his rivals will have their work cut out for them just absorbing the United Kingdom auctions they've bought, let alone getting established on the Continent.
He said: 'We might teach them a few things.'