LONDON - British Car Auctions, long the dominant player in the wholesale used-car auction business in the United Kingdom, faces an unprecedented threat to its position.
Manheim Auctions, North America's richest and most powerful auction company, has entered a partnership with Independent Car Auctions in Bristol, UK, to form ICA Holdings. In the last two years, ICA has bought up three other UK auction companies to put them in a position to challenge British Car Auctions, which has 23 auctions.
The battle lines are drawn. At a 3 October management conference, a memo distributed to British Car Auctions managers told them 'how we intend to deal with a challenge to our leadership of the UK auction market.'
The memo warned: 'We will need battlers...who are prepared to go to the wire to protect and enhance our business.'
The battle is over much more than just the UK. Both companies know a bigger challenge awaits across the English Channel in continental Europe. Unlike the UK and USA, mainland Europe does not have an auto auction tradition, so the two competitors must establish an industry there.
British Car Auctions has been the pioneer on the continent, having invested £35 million since 1989 to open auctions in Belgium, Denmark, Holland and Germany. BCA, as the company calls itself on the continent, will open a seventh auction, in Neuss, Germany, next June. That will bring BCA's continental network to seven auctions.
ICA has been busy absorbing the smaller British companies it bought in the last two years; Central Motor Auctions, BRS Car Auctions and National Car Auctions. All 17 auctions in the group will soon be rebranded with the Manheim name.
ICA Managing Director John Bailey says all his auction companies had record years in 1997, while British Car Auctions lost business. But Tom Gibson, British Car Auctions chairman and chief executive, denies the ICA auctions have taken any business from his group.
Once its new UK auctions are absorbed, Bailey said ICA will turn its full attention to Europe. Although the ICA group operates no auctions on the continent as yet, Manheim has the money to back up its ambition. The partners plan to be open in two or three European countries by the end of 1999, Bailey says. Germany, France and Italy are the countries in which he is most interested.
Both competitors say they are prepared to spend whatever it takes to establish themselves on the continent, a used car market potentially as large as North America.
The contrast between the two chief executives is dramatic.
Gibson, 59, is a tough, wily Scot with a commanding presence. He is a veteran of nearly four decades as a dealer and an auction man.
Bailey, 37, is a boyish executive whose laid back manner fits with Manheim's decentralized style.
The two companies face many obstacles. Because of European value-added tax regimes, which until recently were inhospitable to the used-car business, the continent has been slow to develop an auction industry. (See story on this page.)
Executives say auctions are more than just an industry. They are a culture. Entering the continent means teaching buyers and sellers of used cars how auctions work and why they are successful.
Local laws and used car trading practices differ widely from one country to the next.
'We're moving ahead in countries where there's no auction culture, no used car culture and different languages,' says Gibson. 'It's bloody hard work to create the environment and overcome the barriers.'
One problem is finding locations for auctions.
'We in the auction trade are land-hungry animals,' says Gibson. Indeed, auctions require lots of real estate, but they don't create a lot of high-paying jobs. Therefore local planning authorities often view them with suspicion or outright hostility.
'The challenge the auction companies face varies widely,' says Jonathan Brown, an analyst with Harbour Wade Brown, a consulting firm which has studied the used car market in Europe. 'We are not and have never been a single market. It's as simple as that. It will take generations before it becomes anything closely resembling one.'
Bailey says the entry into European countries will be costly.
'It will require a long-term strategy and deep pockets,' he says. 'We, of course, are fortunate to have both.'
With more than 60 auctions, Atlanta-based Manheim is more than twice the size of its nearest competitors. It is spending $413 million over the next five years to modernize its existing North American auctions and lay the groundwork for Internet-based used car business.
This year Manheim launched AutoConnect, an Internet used car service that quickly became the largest electronic auction service in North America. AutoConnect will eventually be introduced in the UK and possibly Europe.
'We have ambitious plans for adding auctions and expanding the auctions we now have - and those plans go beyond England to the continent,' says Dennis Berry, Manheim president. He was publisher of the Journal and Constitution newspapers in Atlanta, Georgia, before coming to Manheim. The US conglomerate Cox Enterprises Inc. owns both businesses.
Under Berry's regime, Manheim has brought some new ideas to the auction business in America, like AutoConnect, a website that allows dealers to buy a car at auction and advertise it immediately to consumers. In the process, Manheim has become the North American market leader in the electronic trading of used cars.
'We are receiving encouragement from a number of manufacturers to pursue a broader global strategy,' says Berry.
It won't be easy for ICA-Manheim, says analyst Brown: 'The crucial thing for Manheim is not to fall into the trap of thinking it's like America. It's so much more difficult over here.'
Gibson says the ICA-Manheim partnership is welcome to have a go at Europe. Based on his experience there, Gibson believes his rivals will have their work cut out just absorbing the UK auctions they've already bought, let alone getting established on the continent.
He says: 'We might teach them a few things.'