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10 March 2006
Trade
and Industry Committee TRADE AND INDUSTRY COMMITTEE INQUIRY INTO THE GOVERNMENT AND MG ROVER
Please find attached the response by the Retail Motor Industry Federation (RMIF) to your call for evidence as part of your forthcoming inquiry into the role of the government in the struggle to maintain MG Rover as an independent, UK-owned volume car maker. The RMIF represents businesses concerned with providing motor industry products and services and has more than 9,000 members throughout UK, spanning vehicle and automotive product sales, service and repair businesses, from small to medium-sized businesses to large public limited companies. You will be aware that the annual turnover of the UK retail motor industry is in excess of £70 billion and employs 600,000 people in 30,000 businesses. Annually the industry raises £33 billion in tax revenue. The RMIF is one of the UK's biggest trade bodies.
As you will see from our submission the RMIF was on the MG Rover Dealer Task Force.
The RMIF is content for a summary of these comments to be made publicly available. If you require any further information about this response, please do not hesitate to contact me. The RMIF would welcome an opportunity to give oral evidence before your Committee, and I look forward to hearing from you.
Yours sincerely
MATTHEW CARRINGTON
Memorandum by The Retail Motor Industry Federation
1. Introduction This memorandum is submitted in response to the Trade and Industry Committee's Press notice dated 17 January 2006 on the inquiry into the Government & MG Rover. The Retail Motor Industry Federation (RMIF) represents businesses concerned with providing motor industry products and services and has more than 9,000 members throughout the UK. You will be aware that the annual turnover of the UK retail motor industry is in excess of £70 billion and employs 600,000 people in 30,000 businesses. Annually the industry raises £33 billion in tax revenue. As a Trade Association the RMIF worked very closely with MG Rover dealers and was on the MG Rover Dealer Task Force. What follows are some objective comments on: 2. Sales Allowances and Warranty Re-Imbursements
2. Sales Allowances and Warranty Re-Imbursements Through the direct experiences of our MG Rover dealer members and discussions within the MG Rover dealer task force, we have been alerted to the scale of the detrimental financial cost incurred when a manufacturer cannot honour payments to their dealers once the vehicle has been sold. The current payment system involves a delay in monies due from the manufacturer to the dealer, until after the dealer has completed the sale. In the case of MG Rover, our dealers were selling cars at a loss that would in theory have been balanced by the manufacturer after the point of sale. As such MG Rover case dealers lost £20 million in sales allowances and warranty re-imbursements which under normal circumstances they would have received. We believe that problem could have been solved if funds which are due for payment but are subject to a time delay were paid into an ESCROW account by the manufacturer, thereby lessening the financial burden to the car dealer if the supplier goes into liquidation before the due date for payment. In practice, this would not be a financial burden on the supplier as he would benefit from the interest earned on the account but would ensure that the manufacturer could not pass his financial risk of selling the car onto the dealer
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