Still here...Just

Wednesday 03 June 2009

It’s been some time since I last applied fingers to keyboard, for which I offer my profuse apologies. As you can imagine, working in the motor trade for the last few months has been far from the proverbial bed of sweet-smelling flowers, and although I still have my job, dozens of my erstwhile colleagues are already looking for new ones.

Let me start by saying that, despite all the prognosis of gloom from earlier in the year, the downturn has been far worse than any of us were expecting. I’m a glass-half-full kind of guy myself, but six months ago even my gloomiest colleagues weren’t predicting that we’d be looking at a 20 percent collapse in sales volumes, or that several hundred dealerships would be for the chop.But that’s what’s happening. Indeed, I can safely say without fear of being contradicted that this is the worst thing to happen to the retail motor trade in living memory. My professional life has already taken me through the recessions of the early 1980s and early 1990s, and both looked like a walk in the park compared to this one.

So let’s start with some myth-busting. Believe what the media is reporting and people don’t want to buy cars. Not true: the crucial problem is that they can’t buy cars.

Yes, some people have been clamping down on personal spending, putting off buying second or third cars and generally reeling their necks in. But colleagues on the sales floor tell me that the crisis actually runs far deeper, and that it’s the unflashy, middle-of-the-road punters who make up the bread and butter of the motor trade who are finding themselves unable to replace ageing cars. So what’s the big problem? Twofold – firstly, most cars are bought on credit, which it’s increasingly hard to get without the sort of Experian score normally reserved for Russian oligarchs. And secondly, as the residual values of existing cars slides, punters are finding a substantial hole in their ability to cash one car in for another.

Earlier this week I spoke to the despairing sales manager of a large Volkswagen franchise. He had just been dealing with a sensible 50-something couple who were looking to trade in their five-year old Passat for something newer and better on fuel. Unfortunately for them, their petrol-powered Passat was worth about £1200 less than they had bargained for, and the best finance quote they had been able to get for the loan to buy a Golf (from a high street bank) was about £60 a month more than it had been for the (more expensive) Passat.

“What could they do?” asked my mate, “I mean, I had to admit that they would have been mad to go for the deal.” The net result is that they are now effectively stuck in their current car until things pick up, or they manage to save up enough spare cash for a whacking great deposit.

So what about the sudden rash of “zero percent” finance offers? Ah, read the small print. Just because finance is free doesn’t mean that it’s freely available, and cautious providers are refusing to give it to anyone without a good credit record. Even 12 months ago, finance companies thought nothing of green-lighting a loan for someone with £5000 on their credit cards, a 90 percent mortgage and a couple of other personal loans. These days they’d be laughing like the banker on that box-dependant quiz show with Noel Edmonds.

So what does the future hold? The short answer is that nobody knows, not even the senior executives who get paid large salaries for their alleged foresight. Will major car companies go bankrupt or be forced to merge with each other? Almost certainly. Will British car factories close? Highly likely. And – from a personal point of view, the biggest question of all – will I still be working in this industry in six months time?

To be honest, I’ve got absolutely no idea. Wish me luck.