155 British Mercedes-Benz dealers have launched legal action against DaimlerChrysler
UK over the termination of their franchises.

Last December, the dealers were given a year’s notice that they would
lose their franchises in a major restructuring of the UK M-B sales and service

UK vehicle distributors and their dealer networks will lose the European Union
‘block exemption’, which permits exclusive dealer-distributor franchise agreements,
in September 2002 and Mercedes-Benz UK, apparently anticipating the new legislation,
has taken the controversial action of terminating its current dealer network.

Though it has yet to make an official announcement, M-B UK is understood to
be planning a new ‘hub’ network of 11 large, mostly company-owned
‘Experience Centres’ to sell its vehicles, supported by smaller service
centres, only some of which would be recruited from the current network of full-service
Mercedes dealerships.

Dealers are vehemently opposed to the plan and, last Friday, issued legal proceedings
against DaimlerChrysler UK challenging the validity of the termination notices.

“If there were ever any doubts about the seriousness and strength of feeling
felt by UK Mercedes dealers – following the one-year termination notices
received from DaimlerChrysler UK – then they can now be swept away,’
said Alan Pulham, franchised dealer director of the Retail Motor Industry Federation
(RMI), which represents dealers in England, Wales, Northern Ireland and the
Isle of Man.

“It is a great shame that it has come to this but, quite honestly, the
dealers were left with no alternative. DaimlerChrysler UK refused to come to
the table for a serious and constructive discussion, despite opportunities to
do so,” Pulham added.

“It is vital for the future of the whole UK dealer system that this matter
is resolved as soon as possible.”

The family-run Mercedes dealership Speeds, near Stratford-upon-Avon in Warwickshire,
told local newspaper reporters last week that dealer contracts stated D-C should
give two years’ notice of termination.

Managing director Martin Speed was quoted saying he believed that Mercedes
UK wanted to gain control of 70 percent of its UK sales when the new EU rules
came into force.

“If the block exemption does happen then [DaimlerChrysler UK] will be
able to do what they want and dealers like us would not be free to be competitive
and may be forced to close,” Speed told the Stratford Standard newspaper.

The dealership employs 44 but would probably have to lay off around 15 if the
sales section closed, Speed told the Journal newspaper.

He has asked both local and Euro Members of Parliament to raise the matter
in their respective houses in London and Brussels.

Meanwhile, a delegation representing the British dealers plans to take their
case to the DaimlerChrysler annual general meeting in Berlin tomorrow (11 April).

Britain is the third largest market in the world for Mercedes-Benz after Germany
and the USA, and the company said last week that sales for the first quarter
of this year would set a new record.

To view related research reports, please follow the links

DaimlerChrysler Strategic Review

Future of Car Retailing in Mature Western Markets

Car Forecasts to 2005