Dealer in the driving seat: David Gelber

AS HALF a million gleaming new M-registration cars roll out onto Britain's congested roads this month, more than a few motorists must be wishing they owned a stake in a motor dealer. David Gelber already does.

Gelber is the thinking person's derivatives chief, now managing director of Intercapital Brokers, an immensely profitable capital markets brokerage house.

Gelber, who is well-experienced in forex and derivatives dealing, moved over to Intercapital from HSBC earlier this year. He is said to earn dollars 50m for his firm in a good year.

Since 1983, he has owned 14 per cent of First Front, a BMW dealer in central London which sells around 420 new and used cars a year, along with a subsidiary selling Mitsubishis in Weybridge, Surrey.

Gelber himself drives an anonymous Intercapital pool car. But the 47-year-old Canadian has previously enjoyed the Munich marque - ever since, as chief foreign exchange trader at Citibank in 1982, he bought his first 3-series cabriolet.

It was shortly afterwards that Nick Van der Steen, 55, a garrulous south Londoner who is now First Front's chairman and principal shareholder, tried to sell Gelber a similar car, but wouldn't match the discount offered down the road.

A few weeks later, hearingthat Gelber, already by then a successful investor, had sold his 12 per cent stake in the Coconut Grove and Peppermint Park restaurant chain to Courage the brewers, Van der Steen phoned him up.

The facts were that Van der Steen's dealership was running on an overdraft and needed committed capital. Gelber bought 14 per cent of the company and Van der Steen retains the rest.

Like any minority investor in someone else's private company, Gelber has to be able to trust Van der Steen totally. Fortunately, the friendship between these two consummate hagglers has flourished. Gelber speaks to Van der Steen twice a week. He helped fix the cost of the company's debt and reviews the management accounts.

Business is good just now in Kennington Lane. You can tell the economy is beginning to motor ahead, says Gelber, because people are coming in again to buy convertibles for their mistresses, like they did in the 1980s.

Back in 1987, First Front made morethan pounds 500,000 in pre-tax profit on sales of pounds 17m. 'But the business got fat. We'd say, we need another car park attendant, they're only pounds 200 a week, when in fact we should have been asking why we were letting people drop the car in to us for a service, fly off to Italy and get three days' free parking in central London.'

It isn't quite the same as the Thatcher years. Everyone wants a discount now. And the costs are high in BMW dealing. The company employs more than 30 people. It's pounds 20,000 here for new wheel-alignment machinery, pounds 35,000 there for more diagnostic kit, and then BMW wants to take each mechanic off for 20 days' training a year. At a pounds 50 an hour charge-out rate, that's pounds 8,000 a head lost.

The dealer tends to make his money out of the bottom of the range, provided he can get a decent allocation from the manufacturer. But he has to sell more than he would like of the middle and top-end cars, because that is where the manufacturer's profits are, say Gelber and Van der Steen. It's enough to make your heart bleed to hear the two of them.

In fact, the accounts in Companies House reveal that this is a profitable business by trade standards, and that the downside is limited, even in severe recession.

There were losses in 1990 and 1991 which averaged pounds 77,000, whenturnover fell to pounds 15m, but Van der Steen's pay still averaged pounds 73,000. The company was back in profit in 1992 and made pounds 295,000 pre-tax profit in 1993 on equity of pounds 1.6m.

However, Gelber has taken no pay as a director and dividends have been virtually non-existent. So why is he in it?

'I like creating something out of nothing. It's tremendously satisfying. Whereas even if you invest pounds 10m in ICI you are still a non-entity.'

For foreign exchange dealers, long-term normally means tomorrow. But Gelber is investing for the future, perhaps sale or flotation.

Early indications are that August M-reg sales may not reach the Society of Motor Manufacturers and Traders' top estimate of 500,000. But at First Front, they sold 60 new cars this month. Even the short term is looking good.

(Photograph omitted)