Pendragon Announce 500 Job Losses

Pendragon is planning to drop nearly 500 employees from their workforce in light of drastically falling sales. High rates of inflation and rising costs for fuel mean that the market for their more expensive cars is shrinking.

New car sales have fallen significantly as the market reacts to these burdens. The rate of purchase on the retail market fell by 9.5% in May while small businesses reduced their purchases by nearly 15.4%.

Trevor Finn, the company’s CEO, confirmed that increases in fuel prices are responsible for their recent downturn. He doesn’t believe that there will be a need for further cuts in the future. He is confident that this recent downsizing effort has made necessary cuts to streamline the company for a new market. Finn continued by commenting on possible external cures. He believes that temporary decreases in fuel taxes should be considered by the government as a simple way to increase the liquidity of the failing consumer car market. This is a real possibility seeing that such taxes and duties form almost 50% of the total cost.

This news has understandably rattled Pendragon’s share price. It fell 23% to a new market price of 15p. This fall has lowered their total worth to merely £98m. This takes them to a staggering low. Their worth is now 80% lower than it’s peak last August and it is just a shadow of the £504m price tag on former 2006 acquisition Reg Vardy.

Pendragon may not have hit the bottom yet according to some analysts. It is still rated as a high risk company by Citigroup. Their report made special note to Stratstone, a luxury car unit within the company that can take much more damage as the market falls. This is even more likely as further limits forced upon consumers through lower bank lending are now negatively impacting all car dealerships. The report ended on a dark note citing the other plethora of risks that will burden them in the future. These included falling new car registrations, oversupplied manufacturers forcing new pricing pressure, and new regulations.

There is some hope for the general market though. Inchcape, one of Pendragon’s rivals, saw a minor upturn in their sales. Critics such as Brewin Dolphin were quick to point out Pendragon’s bloated state from so many recent acquisitions. Inchcape had management on a much more concise level and has therefore been able to weather the shaky conditions. All isn’t lost for Pendragon though. Finn stays hopeful in the face of the harsh market for one simple reason. Almost 55% of their average profit is earned through the service and maintenance that they offer. In fact they expect that this will only increase as more people stick with older models.

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