Join Create Your Garage or Sign in

21 May Daily Motoring News Summary

Three companies will battle for control of General Motors Europe, which owns Vauxhall and Opel, after the deadline for formal proposals passed. Fiat, Canadian parts maker Magna International and investment group RHJ International are believed to be the

Three bidders target Vauxhall as GM deadline passes

Three companies will battle for control of General Motors Europe, which owns Vauxhall and Opel, after the deadline for formal proposals passed.

Fiat, Canadian parts maker Magna International and investment group RHJ International are believed to be the three organisations that have submitted bids after GM confirmed that it had received three approaches.

The company, along with the German government – GM Europe is headquartered in Germany – intend to identify a preferred bidder by early next week.

It is expected that because a sale is likely to take months to complete that GM will sign a memorandum of understanding with one or possibly two of the groups over the coming weeks before entering formal talks.

Vauxhall employs 5,000 UK staff at Ellesmere Port and Luton. Unions and Lord Mandelson, Business Secretary, are battling to protect British workers amid concerns that protecting German jobs at Opel will be the priority because Berlin is expected to financially back the acquisition.

But Lord Mandelson told the BBC that there would be ‘painful change’ resulting from the takeover of GM Europe.

This, he said, would be inevitable whichever of the three bidders for the European arm of General Motors takes over.

He said: “Whoever comes out as the successful bidder will cut costs and consolidate.”

GM is looking to offload a majority stake in its European division following the collapse of new car sales. It is though to be looking for new investors to inject more than £500 million into the business.

GM is also seeking €3.3 billion in loan guarantees from European governments to keep the business afloat during the economic downturn.

German officials say they have prepared €1.5bn worth of bridge financing to tide Opel through a takeover process.

The bidders are expected to demand that costs are cut at GM Europe to reduce losses that amounted to $1.6bn last year.

Meanwhile, the US government is continuing to work on plans to establish a standalone company to buy the ‘good’ assets of GM’s US operations if the manufacturer is forced into bankruptcy on June 1, the date set by the White House for the company to restructure. (National newspapers: May 21).

JLR chief says Government loans are ‘too slow’

Jaguar Land Rover chief executive David Smith says Business Secretary Lord Mandelson’s £2.3 billion package of loan guarantees are not ‘getting through quickly enough’.

JLR is struggling to get a Government guarantee for a €366 million loan from the European Investment Bank and has been offered strict terms on a deal.

JLR’s owner, Tata Motors, is reluctant to offer further investment because its own financial situation is far from stable.

Lord Mandelson announced the package to help ailing vehicle manufacturers earlier this year. (Daily Telegraph: May 21).

Schaeffler and Continental eye merger

German car parts makers Schaeffler and Continental are considering a merger, in a move that could see the Schaeffler family owners emerging as the surprise winners of an audacious takeover bid that started last summer.

The two companies and their banks have hired Roland Berger, the consultancy, to design an integration plan that could leave the family at the helm of the combined group.

The plan would enable both companies to be merged either into a new company or, more likely, combined under the umbrella of Continental, which is a listed company.

Schaeffler took over the much larger Continental in a highly contentious deal that started last summer. Since then the management of both companies have battled. Schaeffler’s management has fought for more influence, while Continental’s has sought to gain independence.

The two companies have admitted they are exploring options for further collaborations and that an integration was among those options. (Financial Times: May 21).

Garages accused of fleet ‘rip-offs’

Fleets are being advised to protect themselves against service centres that overcharge for items that don’t need replacing, or for repairs not carried out.

With it becoming more common for company vehicles’ lives to be extended to four or even five years, the opportunity for unscrupulous service and maintenance centres to take advantage increases.

Most manufacturers’ warranties expire after three years and maintenance becomes more of an issue as a vehicle ages.

Many fleet managers feel they can protect themselves by specifying a maintenance-inclusive contract - according to the BVRLA 90% of leased fleets do.

The BVRLA said its members can offer advantages of scale by negotiating on behalf of fleets.

“Because of the scale of their operations, our members are able to agree very competitive prices on maintenance and repair work,” said Jay Parmar, BVRLA head of legal services.

“Garages know that they also employ technical experts who have the knowledge and expertise to approve invoices and highlight anything that looks questionable.”

However, according to an exclusive Fleet News survey, over 40% of fleets that currently have service-inclusive contracts are now considering dropping this option.

When asked whether they would consider taking the service element out of their contract hire agreement, 41% said ‘yes’.

There is a feeling among those surveyed suggesting that lease companies are also overcharging for maintenance and servicing inclusive contracts.

This suggests that fleet managers are questioning the value of the services offered by their lease provider and are deciding that it is better for them to take their chances and manage service and maintenance costs themselves. (Fleet News: May 21).

Leasing and rental firms face bankruptcy fear

Some of the country’s independent leasing and rental companies could be facing bankruptcy after changes to their funders’ lending criteria.

Such is the seriousness of the situation that the BVRLA is working with some lenders to secure terms and is also investigating a syndication option.

A creditors’ report on the recent bankruptcy of  rental company 1car1 highlighted issues that, if replicated, could leave other companies vulnerable.

Its practice of borrowing against the full list price of cars was stopped after funders reviewed their lending policy.

Cash flow was further hit when a number of other funders withdrew from vehicle financing.

Fenton Burgin, a partner in corporate finance at Deloitte, said: “It’s common practice in the industry and it’s certainly an area more banks are focusing on. There will be a number of finance directors in the industry who will be very concerned about the terms of their existing banking facilities.”

All vehicle leasing and rental companies, whether bank-owned or independent, are finding funding more expensive and difficult to get hold of, according to John Lewis, chief executive of the BVRLA.

“We are working with a number of our independent leasing company members to develop alternative sources of funding,” he said. (Fleet News: May 21).

Price rises faster as £1 a litre returns to many forecourts

Accelerating average UK petrol prices have risen to 97.68p a litre, helped by a 1.3p spurt in the past week, according to the AA’s latest fuel price report.

Petrol costing around £1 litre has now re-appeared at motorway service areas in England and Scotland, and is common in rural parts of the UK.

The 2.67p increase between mid April and mid May is greater than the 2.33p fuel-only increase last month (ignoring the 2.12p increase in duty and VAT on April 1). This not only adds £1.34 to the cost of filling a typical 50-litre tank, but the £5.79 increased monthly spend on petrol for a two-car family would, over a year, wipe out half the savings from domestic energy price cuts announced last week.

The average cost of diesel has gone up by less than a penny, from 102.69p a litre in mid April to 103.49p in mid May. However, 108.9p is not uncommon at motorway service areas and beyond what the AA considers reasonable, even for providing 24-hour driver facilities.

Much of the blame for prices that are again draining family budgets, undermining leisure and high street spending, and making a consumer-led recovery from recession more difficult rests with stock market speculators.

Oil prices that pushed up to around $60 a barrel this week were spurred on by markets betting on early economic recovery, despite oil’s low demand and over supply.

AA president Edmund King said: “Everybody is trying to pump up their profits at the expense of the motorist.” (AA: May 21).

4x4 menace in Mediterranean car hire minefield

UK holidaymakers looking for a car hire adventure in the Med this year will enter a minefield of hidden charges, complex insurances and unhelpful service when they hire a car, an AA Eurotest survey in seven countries has found.

Hire a 4x4 vehicle and there is a more than 70% chance of being handed keys to a death-trap, reveals the survey.

Not one of the 60 car hire outlets in 12 Mediterranean resorts was rated very good for customer service by expert inspectors hired by the Eurotest consortium, of which the AA is a leading member. Only eight were good and 37 were ‘poor’ or ‘very poor’.

The inspectors were twice over-charged on their credit cards and a lack of vehicle condition checks by hirers meant that 23 car rentals left holidaymakers with no defence against an unjustified claim for damage. Contracts were sometimes not translated into English - half of agreements in Rimini were written in Italian.

Information about insurance coverage was often confusing, insufficient or incorrect, revealed the survey. Time and again, seeking assistance on levels of insurance cover, refuelling procedures or what to do in an emergency left the inspectors waiting in vain.

More than a tenth of vehicles had empty fuel tanks when hired out, a particular problem affecting six out of the 12 cars in Turkey. Surcharges for a second driver ranged from free to €31, charged by a company in Portugal.

Holidaymakers looking to travel off-road or spice up their driving with a 4x4-style vehicle are very likely to get more adventure than they bargained for. If over-inflated tyres, making road-holding skittish for inexperienced drivers, wasn’t bad enough, five of the seven inspected had serious mechanical defects.

The AA said: “Quality of service and potentially expensive pitfalls in agreements, insurance and car-checking has improved little from when a similar survey was carried out in 2005. Holidaymakers, particularly at peak season when rental desks are hectic, are too often vulnerable to the potential for hire firms to accidentally or deliberately over-charge.” (AA: May 21).

HR Owen used business booms in 2009

Car dealer HR Owen has reported a ‘very strong’ used car business in the first four months of 2009.

But the luxury car dealer said the market was now suffering from a shortage of high quality vehicles with values ‘significantly increasing’ for most of its brands.

In a trading update, the company said that finance revenue was lower than in previous years on new and used cars as credit and margins continue to be squeezed.

But aftersales had turned in a ‘solid performance’ because of the reorganisation of its 11 service franchises in London in 2008, including new facilities for Ferrari and Maserati.

HR Own chairman JP MacArthur said: “We are awaiting the introduction of important new models in the second half of the year, where we hold strong forward orders for many of our brands.

We expect these new models to bolster margin performance which has been adversely affected over the last 12 months, but new car sales remain significantly lower than last year.”

Mr MacArthur announced he was retiring at the age of 74. HR Owen is now looking for a chairman but in the interim has handed over the reins to senior independent director Ramon Pajares. ( May 21).


More On This Car
Take one for a spin or order a brochure
Request a brochure
Request a test drive