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Dealers count cost of Opel exit

Incomplete: The South Yarra Opel dealership in Melbourne's south (below) is still under construction but it won't look like this artist's impression (left) when finished.

Dealers to seek big claims following Opel Australia closure

6 Aug 2013

OPEL’S 20 Australian dealers are reeling from the shock announcement that the franchise is being withdrawn from the market after just 12 months of operations, leaving retailers totalling up massive losses from their investment in the brand.

While dealers are to receive payments from Opel Australia for unsold stock, demonstrator stock and signage, dealers are counting up the collateral damage that will be inflicted on them from the closure.

Dealers were reluctant to go on the record with GoAuto this week as there are still many negotiations to come before Opel Australia finalises its compensation payments to its retailers.

But one leading dealer was scathing in his assessment of the withdrawal from the market after such a short time and said the level of pain inflicted by the importer on dealers “who were backing the brand to the hilt” was “a perfect example of why dealers are pushing the federal government to review the franchise code”.

Dealers have been arguing with the government that they are being placed under intolerable financial pressures by car companies using their “power of life and death” over retailers because car-makers have an uneven bargaining position over their dealers.

They argue that because there are such huge sums involved in setting up a dealership compared with other franchises (Baker’s Delight, for example) the government needs to create special rules to protect car retailers from overbearing behaviour.

While dealers are not yet aware of the budget that Opel AG has put aside to close the operation down, many dealers contacted by GoAuto said they would seek compensation that would be “nothing short of recovery of all losses associated with our setting up the brand and establishing a sales base for Opel”.

One said that dealers were on five-year contracts and therefore had “every expectation that Opel was here for at least five years at a minimum”.

A key ingredient will be recovery of the investment made in showrooms.

The investment commitment by dealers into Opel showrooms varied between $500,000 to around $3 million. The end came so swiftly that some new Opel showrooms are still under construction and others have yet to have the signs erected.

This leaves dealers seriously exposed. Dealers typically borrow the capital to build their showrooms and factor in funding of the debt over 10 to 12 years of operating the brand for the car company.

But, by pulling the pin so soon, dealers are left with an unused showroom without any sales to support the overhead.

Several dealers said that, as part of their settlement, they would be asking Opel to take over their showroom investment overhead until they could get another brand installed.

But they said most of the franchise appointments for new brands have now been made and there would be thin pickings for finding a franchise to take over the Opel showrooms.

Another issue is the losses dealers have made in supporting the sales of the brand in the first year. One dealer estimates he has “seen off the better part of a million dollars in losses” to establish a strong customer base for service and ongoing sales.

“We always expected in the first place that we would be taking losses in the first year because it would take a while to get it (Opel) established (in the minds of buyers),” he said.

We have worked really hard to get our sales up but we were losing on those sales this year in order to get Opel established. Now they just walk away.” Dealers are also concerned that customers who bought Opels from their company will be left with a sour taste in their mouths about ever buying a car again from the same dealership group.

One long-standing dealer said: “I have never known anything like this to happen before. I cannot work out what they were thinking. Why did they ever come here in the first place if they were just going to pack up their bags and go after such a short time?” Another said: “It is not like they entered Australia with no knowledge. They have sold their cars in Australia as Holdens for 20 years. They knew full well it was a difficult market. That’s why we are selling Daewoo cars as Holdens because Opel could not compete with the pricing.

“They must have known that it was going to take time. All they had to do was look at Volkswagen which was a much better-known brand in Australia than Opel and it took years to get that going again here.” Dealers are saying they had suggested to Opel Australia that they be allowed to minimise their risk and wait until sales reached a critical mass before building exclusive showrooms.

But, they said, Opel management insisted that if dealers were not prepared to commit to building a showroom they would not be awarded the brand and it would go to someone else.

Meanwhile, dealers who attended the 1pm meeting at Holden headquarters in Melbourne last Friday began to “suspect something was up” when no Opel management were present in the meeting room to welcome them.

The meeting had been rescheduled from a month earlier because, dealers were told, an Opel manager could not make it to the earlier meeting.

When management eventually appeared they lost no time in breaking the shock news that Opel was no longer prepared to supply cars because whoever planned the foray into Australia had got the numbers dramatically wrong.

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