Mercedes-Benz dealers in the UK have amassed a legal fund of about £600,000 (E944,000) to fight parent DaimlerChrysler's decision to terminate all 156 franchises by the end of this year.
About 120 dealers are preparing for what they believe could be a long legal battle. The dealers claim DaimlerChrysler gave them insufficient notice of termination under European block exemption regulations. D/C served them with 12 months' notice in December.
The dealers believe they should have had at least 24 months' notice under block exemption rules. D/C claims the 12-month notice is enough because it needs to reorganize the UK's Mercedes network.
'We've hired some very expensive legal advice, and that advice is saying, 'you've got a good case,'' said Alan Pulham, director of the National Franchised Dealers Association in the UK.
Some existing Mercedes dealers will have the opportunity to continue as owners of dealerships under the new system. That may explain why only about 120 of 156 dealers have joined the legal battle.
Under the new system, the UK will be divided up into territories featuring main dealers, satellites service stations and retail outlets. In three big cities - London, Birmingham and Manchester - the centers will be company owned. They will feature Mercedes-Benz Experience Centers, where customers can see the full range of products, test drive cars and immerse themselves in the brand. Customers would visit the centers, then be directed to buy cars from a local dealer. In the case of the three big cities, the local dealer would also be company owned.
Nick Adams, a spokesman for the Mercedes-Benz dealer association and managing director of John Tallis (Bath) Ltd. a Mercedes dealership, said the plan is anti-competitive.
'Within the M25 [a circular highway around London] there are 17 showrooms and outlets and they're owned by eight different companies, all independent,' he said. 'At the end of this they'll all be owned by one owner. You won't get competitive price quotes.'
Adams said if D/C is allowed to get away with the terminations, other dealers in the UK and Europe should be worried about what manufacturers have planned for them.
Geoff Day, head of communications for DaimlerChrysler UK, said the UK dealers should not have been surprised by the action.
'We first started talking to dealers last May about the fact we were having a review of what the network will look like in the future. It has been an ongoing discussion.'