Archive for April, 2009

LDV: A Bail Out Too Far?

Posted in business on April 29, 2009 by Tom Leatherbarrow

The struggles at LDV are another nail in the West Midlands automotive sector and will undoubtedly generate more calls for Government bail-out money and cries of “why are the banks getting all this money, what about the automotive sector?”Unfortunately, on this occasion, I can’t see the Government stepping in. A simple cost benefit analysis should demonstrate that LDV probably has neither the brand, nor the economies of scale to compete in the modern, globalised automotive sector, regardless of the current economic climate. Its competitors – Ford, Peugeot, Mercedes Benz etal have a scale which allows them to offer huge discounts to the fleet sector which I doubt LDV, without Gazprom propping it up, could compete with.

And, in the modern world, scale is everything I’m afraid. I remember talking to the CEO of one of the UK’s biggest buyers of white vans many years ago. His fleet, circa 60,000 vehicles on a three year replacement cycle, was dominated by Ford and Mercedes. Would he consider other manufacturers? “We get made some stupid offers, massive discounts to get a foothold in our fleet” he told me. “But the point is what the vehicle will be worth after three years? You can always get cash for a Ford or a Mercedes.”

The same could be said for bail-out money.