United kingdom - John Tallis' steel and glass Mercedes-Benz dealership looks somewhat odd in the town of Bath, the former Roman spa known for its 18th century Georgian buildings. Still, the dealership is in an ideal location for luxury marques. The rolling Somerset countryside in western England is home to wealthy landowners, farmers, racehorse trainers and stockbrokers living 90 minutes from the center of London.
Tallis - whose family has run the dealership for 40 years - sells 200 new and 100 used cars a year. It's a nice business, but he may lose it all. DaimlerChrysler UK has fired him and 157 other dealers. The automaker intends to replace them with 35 big regional dealerships, dubbed 'market area concepts.'
These dealerships will be based in big cities such as London, Manchester and Birmingham, controlled by DaimlerChrysler and operated by large dealer groups who would own an equity stake. Outlying dealerships will become service satellites owned by those big groups.
The plan will increase the number of retail outlets by more than 10 percent, says Dermot Kelly, director of Mercedes-Benz UK passenger cars. Smaller dealers such as John Tallis would work for the regional dealerships or find a new franchise.
Many dealers believe DaimlerChrysler is using the United Kingdom as a test market. If it works here, the automaker will try it in other markets. For the record, the company denies any plans to introduce regional dealerships elsewhere.
PROTESTS AND LAWSUITS
In the United Kingdom, dealers are not giving up without a fight. Led by Nick Adams - managing director of the Tallis dealership - they have filed a lawsuit against DaimlerChrysler. After protest meetings at the Geneva auto show and in Birmingham, more than 100 Mercedes-Benz dealers sued the company for breach of contract. They have raised more than $1 million to fund the court battle. The dealers' franchises expire December 31. That gives them little time to line up new franchises to keep their business viable.
The winners in this deal, Adams says, are the big dealer groups who can afford the millions of dollars required to restructure. The losers would be small dealerships and customers. 'The cost of this restructuring is going to have to be recouped somehow,' Adams says. 'That cost will be passed onto Mercedes car buyers.'
DaimlerChrysler disputes Adams' comments. 'From the outset we have been willing to discuss with our dealers our new retail strategy,' Kelly says. He adds that Mercedes hopes for a 'seamless transition.'
DaimlerChrysler is launching dealerships in the United Kingdom as it prepares for the possible end of Europe's block exemption. The exemption allows manufacturers to sell new cars only through their captive dealers. If the European Commission kills the rule, automakers fear an influx of companies that would sell cars - particularly supermarkets. In fact, Fiat has gone to court to block a supermarket chain from selling cars in southern Germany.
CARS AND TOILET PAPER
According to The Associated Press, one of Germany's most venerable grocery store chains sells Fiat cars alongside its fruits and vegetables. Edeka offers two Punto packages, each for $11,270. As an added incentive, each package offered various combinations of a scooter, a computer printer, a mobile phone, a camera and a notebook computer. The offer was available over the Internet and at stores in the southern German state of Baden-Wuerttemberg through the end of May.
Customers must travel to Berlin to pick up the cars at a local dealership. Internet demand was so high that the server crashed twice before noon on the first day the deal was launched. Edeka spokesman Duschan Gert says it is too early to say how many firm orders the supermarket has received.
Upset that its Punto compact is sold alongside toilet paper and bratwurst, Fiat went to court in May to block such sales.
Fiat, DaimlerChrysler and other automakers want to maintain control over transactions with customers. One way to do this is to buy a share of the retail operations. In several countries, Ford formed regional dealerships in selected cities by purchasing local franchises. Ford's policy ran into bitter opposition among U.S. dealers.
These have been step-by-step efforts to modernize dealer networks. What DaimlerChrysler UK plans for its dealers is more drastic, and European automakers are watching closely. DaimlerChrysler planned a less drastic program in Germany, but met strong opposition from retailers.
In the United Kingdom, the High Court will hear the case in mid-July. Adams says his dealership's fate hangs in the balance.
'The trouble is DaimlerChrysler has totally undermined the value of this business,' says Adams. 'No bank is going to look at us with a termination notice hanging over our heads.' ANI
Correspondent Anthony Lewis and The Associated Press contributed to this article. E-mail International Editor Chris Wright at [email protected]