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UNION ASKS AA TO CONSIDER ‘DEBT FOR EQUITY’ SWAP

UNION ASKS AA TO CONSIDER ‘DEBT FOR EQUITY’ SWAP

AA faces a tough few years

The GMB union is calling on the directors of the AA to give ‘serious consideration to negotiations’ on converting debts to equity to relieve growing pressures on the day to day operation of the business from having to service the £2.7 billion debt mountain inherited from the private equity previous owners. This follows an announcement by AA on a profits warning and dividend cuts.

On 21st February, the AA announced that profits will be £50m lower than forecast and that it is cutting the dividend from 9.3p per share to 2p. Debts are nearly eight times net free cash flow, an unusually high amount. AA membership figures are also down.

The figures came as AA CEO Simon Breakwell announced a three-year ‘strategic review’ of the business, which included modernising the breakdown service with new IT systems
and connected car technologies, while also increasing the reach of its insurance services.

CAT has seen an all-staff email from Breakwell. In it, he admits that ‘the reality is that many of you are working against the odds’. He mentions the speed of dispatch, stretched patrols and the reliance on third party garaging as reasons why the service has been pushed. He also mentions the legacy IT systems used by the organisation ‘that do not always allow call handlers to access the information they need quickly when dealing with breakdowns’. He adds that these old systems are now being upgraded ‘to allow us to deliver our strategy’.

Paul Grafton, Regional Officer at the GMB union welcomed the sentiments in Breakwell’s email for ‘recognising the pressures staff are facing in the day to day operations of the business’

He added: “Directors need to now face up to and deal with the fundamental cause of the pressures- the £2.7bn debt mountain inherited from the private equity owners.

“When debts are more than two times net cash flows, warning lights flash in any normal business. At AA, the ratio is nearly eight times. It is not sustainable. No amount of hopeful scenarios will make it so. Growing the insurance business, patrols selling more batteries and tyres and in car diagnostics will never fix this”.

“It won’t be easy but AA directors have to give serious consideration to negotiations on converting debts to equity to relieve growing pressures on the day to day operation of the business”.

The news follows a report in last month’s CAT of how the AA announced 100 redundancies and closed a training centre. Despite bad headlines, the AA brand remains strong, topping a poll of the UK’s ‘Most loved brands’ several years running.

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ASA FINDS SERVICING STOP ADVERT ‘MISLEADING’

ASA FINDS SERVICING STOP ADVERT ‘MISLEADING’

Two complaints against aggregator

The ASA received two complaints over claims made on repair aggregator Servicing Stop’s website.

One complainant, who believed that Servicing Stop continuously charged the ‘sale’ price for their services and that the savings were therefore not genuine, challenged whether the savings claims quoted within the ads were misleading and could be substantiated, while the other complaint challenged if the prices were misleading because their vehicle required a specific oil with VM approval that incurred an extra charge.

On the first complaint, the ASA looked at a series of complex savings offered on the website that were promoted as being ‘up to 60 percent off’. In response, Servicing Stop stated that at certain points throughout the year, they ran sales during quiet periods. It provided the ASA with dated and undated invoices showing the price history of the Kia Sedona vehicle servicing. It said that the period of time for which the new lower discounted price was available was not longer than the period of time that the item was listed for at the previous higher price.

It provided a spreadsheet of the sale dates for the servicing of the Kia Sedona and Honda CRV vehicle models over a six-month period from April 2017 to October 2017. There were variations between the ‘previous’ prices stated over this period. Its data showed that the Honda CRV services were on sale for a total of 37 days over a six-month period and the Kia Sedona had a sale period of 41 days over the same six-month period. It explained that there were fluctuations between the previous prices due to the many variants in price between the number of makes multiplied by the number of postcodes.

The ASA disagreed, noting that the ‘previous’ price varied when the discounted price remained the same. It told Servicing Stop to ‘ensure savings claims are genuine’. However, on the price of VM specific oil, the ASA noted that the aggregator put a disclaimer in saying that the price of such oil can vary. As a result, it was not in breach on this complaint.

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RETAIL TRADE FACES ‘UNCERTAIN FUTURE’

RETAIL TRADE FACES ‘UNCERTAIN FUTURE’

New car registrations continue to fall

The UK’s motor retail and parts industries face an ‘uncertain future’ as the number of firms in ‘significant financial distress’ according to a new report.

The research, published by insolvency firm Begbies Traynor shows that both new and used car dealers are having a very hard time as new registrations continue to fall. Interestingly, the firm cites a glut of used cars on the market as one of the reasons for used car dealer’s distress, rather than the number of pre Euro-5 vehicles taken out of the market as a result of scrappage schemes offered by various VMs.

Over the past year, the level of ‘significant distress’ for used car dealers rose by a third to 1851 dealers, compared with the same period in the previous year.

Julie Palmer, partner at Begbies Traynor, said: “Consumers up and down the country are tightening their belts in the face of rising inflation, increased interest rates and real wage pressures, causing households to put the handbrake on spending on big ticket purchases, and encouraging many to hold on to their vehicles for longer”.

“Even those owners looking to upgrade their vehicles are struggling to do so, as a recent glut of second hand cars on the market continues to depress the value of second hand motors while making new vehicles and their hefty price tags even less appealing”.

New car dealerships fair little better, with consumer confusion regarding diesel legislation and a lack of electric infrastructure keeping would-be car buyers away. Worryingly, the findings chime with the results of a KPMG survey released at the same time that predicts over half of all dealerships in the UK could close within eight years, leading a number of dealer principals and other motor industry executive to state that the only way these businesses can survive is to convert to a used car dealer and/or repurpose to becoming an independent service garage (see page 5).

FINANCIAL HEALTH

The Begbies Traynor findings were published in the firm’s Red Flag alerts, which monitors the financial health of UK companies. It warns that a number of macro-economic pressures last year contributed to this considerable increase in distress, with the combination of rising inflation, stagnant real wage growth, a weak
pound, political uncertainty, November’s rise in interest rates, and the ever-tightening credit environment putting increasing financial stress on businesses across the country. As a result, 258,349 UK businesses ended the year in a position of negative net worth, while a further 154,251 demonstrated a ‘worrying increase’ in their working capital deficit.

Palmer added: “When the overall business environment is so challenging, unfortunately there can be few real winners, however certain sectors of the economy are certainly feeling the pinch more than others. In particular, the vast UK support services sector saw a spike in distress as their stretched customers reined back spending. The construction industry saw the lowest levels of optimism in five years while the real estate sector felt the full impact of the increasingly stagnant UK housing market”.

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BREAKING: ECP MANAGEMENT ISSUE STATEMENT ON ANDREW PAGE CLOSURES

BREAKING: ECP MANAGEMENT ISSUE STATEMENT ON ANDREW PAGE CLOSURES

LATEST: Regarding yesterday’s CAT story on a number of Andrew Page branches that were suddenly closed, the following written statement has been issued by a Euro Car Parts spokesman:

“We can confirm that we have closed 10 Andrew Page branches, following the completion of a recent business operational review by the Andrew Page Management team.  There are no plans to close any further Andrew Page branches. We are currently working with employees at affected branches to look for alternative options within the ECP or Andrew Page network, and working closely with customers of these affected branches.”

Andrew Page is the nation’s oldest factor brand, having celebrated its centenary in 2017. The company briefly went into administration in 2016 before being bought by Euro Car Parts in 2016. 

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HELLA ANNOUNCES NEW PLANT AND BUSINESS DEAL

HELLA ANNOUNCES NEW PLANT AND BUSINESS DEAL

Hella and BHAP tie the knot

AS PART OF growing demand for its vehicle lighting systems, Hella has opened a new production plant in Tianjin, China valued in low-to medium double-digit million euro.

The opening of the site follows a joint venture between Hella and Beijing Hainachuan Automotive Parts Co. Ltd. (BHAP) – a subsidiary of the BAIC Group, which will see both parties collaborate on LED headlamps, rear combination lamps, car body lighting and interior lighting under the newly formed entity, ‘Hella-BHAP’.

Markus Banner, Member of the Hella Management Board, said: “The new plant will strengthen our market position on one of the world’s major automotive markets. When extending our structures locally here on site, we are also very consciously counting on collaboration with successful Chinese partners such as BHAP. And that is because such cooperation means that we will be able to meet the needs of local customers even better than ever before.”

“Tianjin, where the new factory is located, is of strategic importance to the Chinese automotive industry as many of our key customers are located nearby”, said BHAP General Manager Chen Bao, “Hella is a perfect partner for BHAP, and we join hands to develop the automotive lighting business in this region and provide our clients with the best services and support,” adding that its cooperation will gradually expand into  electronics and aftermarket.

The new location employs100 staff with plans to extend this number to 250, along with its current site and 12,000 sq m production facility in due course.

 

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VOLVO INVESTS IN £6MILLION TRAINING FACILITY

VOLVO INVESTS IN £6MILLION TRAINING FACILITY

Volvo’s Daventry premises

A new Training and Development Centre has been opened by Volvo Car UK, following a recruitment drive to employ 300 new technicians into its dealer network by 2020.

The Daventry-based premises comes as a £6m investment that will offer year round training for Volvo staff and its retail network. To support this, the site contains a 16-vehicle bay workshop, accompanied with a spacious auditorium and classrooms featuring remote video and web-based technologies for supporting off-site and online training. In addition, the centre is equipped to assist technicians with servicing electric and autonomous vehicles.

The launch will help streamline the firm’s operations including its new Volvo Retail Experience (VRE) and Volvo Personal Service (VPS) retail initiatives as Jon Wakefield, Managing Director of Volvo Car UK, highlights: “I’m very proud of our new training facility, which represents a significant commitment to both our operations in Daventry and our retailer network throughout the country.

“The site is a fitting accompaniment to Volvo’s transformation into a true premium car brand that is a technological leader, as well as the big improvements we are
introducing to the customer experience.” The dealership is already hosting training programmes for its new XC40 premium compact SUV that will appear in UK retailers early this year. The full list of courses can be accessed via Volvo’s website (volvocars.com).

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ASA FINDS BMW AD ‘MISLEADING’

ASA FINDS BMW AD ‘MISLEADING’

BMW i3 model

The Advertising Standards Authority (ASA) has upheld a complaint against BMW regarding a paid-for Facebook post, which featured a video claiming its i3 model contained ‘zero emissions’ in the voice-over and subtitles on screen.

The complainant challenged whether the claim: “With zero emissions, the i3 is a clean car and helps to give back to the environment” could be ‘substantiated’.

BMW (UK) responded saying that its i3 vehicle came in one model with the addition of a ‘range extender’ as an option. The firm said this comprised of a small petrol engine that didn’t drive the car unlike hybrid versions and instead, maintained the state of the charge of the battery, allowing the car to run purely on electric. In addition, BMW told the advertising watchdog that the reference to ‘clean car’ ‘should have been interpreted in the same manner as when consumers compare an electric car to their previous petrol ones as electric versions are considered better for the environment.

Despite the VM’s evidence, the ASA found this ad breached the rules, because it does still have a petrol engine, albeit one that isn’t connected to the drivetrain.

“We noted that BMW considered the statement was meant as a comparison between buying an electric car and buying a petrol car rather than not buying a car at all. However, we did not consider that this was sufficiently clear in the ad and concluded that the claim was misleading,” the ASA said in a statement.

The ad cannot appear again in its current form and has told BMW to ensure its environmental claims in relation to all-electric vehicles are clear in the future.

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AAG ACQUIRE FAST PARTS WALES AND MORE

AAG ACQUIRE FAST PARTS WALES AND MORE

Newport-based factor chain Fast Parts Wales and Peterborough-based Hereward Car and Truck Components are among a list of businesses acquired by Alliance Automotive Group in the last quarter.

Fast Parts Wales is a three branch light vehicle factor business based in South Wales with depots in Abercarn, Cwmbran & Tredegar.  The business was started around 25 years ago by the Travis family and the deal also includes the FastRads cooling system business based in Abercarn. The annual sales are around £9m and prior to the acquisition the business was a member of AAG’s GROUPAUTO buying group.

Hereward Car and Truck Components is another family run business, started in 1983 by the Saddington family. The two-branch factor was a member of the IFA buying group prior to the acquisition by AAG. Annual sales have been around £2.8m.

Single branch factors Macclesfield Motor Factors, DMFX (Darlington) and GD Components (Anglesey) have also been acquired by AAG.

There’s more info in the January issue of CAT Magazine.

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SUPPLIER UPDATE: WINTER DEALS

SUPPLIER UPDATE: WINTER DEALS

New supply deal for Pro-Align

A couple of important supply deals have been signed this month. First, around-the- wheel kit dealer, Pro-Align, has arranged with diagnostic tool maker Texa to supply the latter’s new aftermarket ADAS system. As the wheel alignment company has a contacts book full of past and existing customers in the crash repair and tyre fitting markets, it seems like an obvious add-on.

Pro-Align will also carry Texa’s range of diagnostic equipment.“Texa is pleased to welcome Pro-Align to its’ distribution network, where they are ideally placed to offer a complete service to OE and professional workshops facing the challenges of repairing newer vehicles fitted with Advanced Driver Assistance Systems,” commented Dave Gordon, Texa’s OE and National Accounts Sales Manager.

Meanwhile, Poland-based supplier of new and remanufactured rotating electrics, AS-PL Limited has struck a deal with the Nexus trading group. The brand’s products will be available through factors that buy with the group, initially through Nexus Automotive’s Central Europe representative. Tomasz Kaszubowski VP of AS-PL said: “When joining the Nexus Automotive Central Europe group, we gain not only the ability to share knowledge and mutual experience. At the same time, we can carry out actions that will improve our competitiveness and contribute to satisfying our customers’ needs.”

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CAT AWARDS 2018:  VOTING NOW OPEN

CAT AWARDS 2018: VOTING NOW OPEN

The Awards have taken place and the winners have been announced. Find out who won what in the March edition of CAT

 

 

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