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Dealer stock rebuff

Piling up: Car stocks are building as sales slow.

Car companies “minding their own business” when it comes to inventory levels

General News logo3 Feb 2009

By JOHN MELLOR

REQUESTS by dealers in New South Wales for assurances from car importers and manufacturers that they would not impose increased cost burdens during the financial crisis have been effectively fobbed off – in public at least.

After an emergency meeting of dealer members of the MTA of NSW late last year in the wake of falling sales and uncertainty over floor plan funding, the association wrote to each car company requesting their assurances that dealers would not be financially burdened by having huge stocks on cars imposed on them.

The letters said the dealers were concerned they would be sent unwanted stock or stock they did not order. This would be charged automatically to the dealership on delivery. The association also raised the issue of penalties being imposed on dealers that did not take slow-moving or obsolete stock they did not want.

The dealers were concerned some companies sitting on mountains of cars caused by ambitious ordering on their factories would pass those cars on to retailers who would be expected to carry the holding costs. The concern was that this extra expense could tip many dealerships out of business.

The MTA of NSW also raised the issue that insistence by car companies to meet expensive corporate capital expansion projects should be put on hold until normal times return. Assurances were sought that programs would be put on hold where these would place financial stress on dealerships during the downturn.

GoAuto understands that only about half the car companies operating in Australia replied to the letters and, of those that did reply, most effectively said that no such assurances to the association would be forthcoming because these issues would be handled between their dealer groups and the companies.

The letters are said to have stressed the strong relationship between dealer groups and car companies and that dealers had the opportunity to raise these issues individually or in internal company-dealer forums or through dealer councils.

While on the surface the MTA of NSW requests appear to have been ignored, many dealers are said to have been encouraged by the number of car companies that replied.

Others are reporting that behind the scenes the issues of stock and capital spending pressures on dealers have been elevated on the radar screens of car company managements and some discussions are under way in some companies.

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