Car gloom leads to £14m revamp at Lex

Lex Service, Britain's biggest car dealer, yesterday acknowledged the gloomy outlook for car sales by unveiling a £14.5m restructuring aimed at cutting costs.

The rejig, which will result in about 100 job losses, simplifies Lex's management structure and is likely to lead to the closure of some dealerships.

But the company said that last year's profits, due to be announced next month, would be largely unaffected by the £14.5m provision as there would be a similar amount of exceptional gains from disposals. The changes should result in annualised cost savings of about £4m, acording to Lex, and further savings down the line are hoped for.

David Liebling, Lex's spokesman, said the company accepted that the flat market for new cars meant growth could come only from getting the cost base down while increasing market share. "We had been looking at its operating structure for some time, and a new managing director, Jon Walden, bought into the dealership division, has carried through the change."

Lex is to abandon its practice of grouping dealerships on a franchise basis for two regional groupings. "We're still seeing slow but steady growth, but it has become increasingly clear that we can't rely on primary demand for cars to produce the sort of returns we require," Mr Liebling said.

He admitted that the £14.5m provision included some elements unrelated to the managment structure changes, but would not elaborate as the company is in a close period with its results coming up. But analysts said that dealerships that were not producing adequate returns were likely to close.

Rob Golding, analyst at SG Warburg, said that Mr Walden, who took over the car retailing arm about six months ago, had performed a similar cost-cutting exercise at Lex's leasing division.

The four franchise-based divisional directors covering Lex's volume car dealerships have been replaced by two regional directors, while further savings will be made through a reduction in staffing levels at the Lex Retail Group head office and in the LexService corporate office.

Mr Liebling confirmed that Lex was looking to build up a network of dealerships in Continental Europe, following the recent acquisition of a French chain. He also said that Hyundai, the Korean marque distributed by Lex, had powered ahead after a shaky first half.

Harry Philips, a motor analyst with Panmure Gordon, expects the group to turn in pre-tax profits of £41m for 1994, and has pencilled in £51m for the following year.