While VW is full of praise for the work of Irish car importer MDL on its behalf over the course of almost six decades, it now feels it can do better itself, writes Daniel Attwood
Ireland's largest car importer, Motor Distributors Limited (MDL), has confirmed that it has agreed to hand over the importation and distribution rights of its most significant range of cars to Europe's biggest carmaker, Volkswagen AG.
From October 1st, 2008, the German manufacturer will take control of the distribution of all new Volkswagen, Audi and Skoda cars as well as Volkswagen commercial vehicles in Ireland, bringing an end to a 57-year partnership between MDL and the German carmaker.
The agreement is the result of over three years of discussions between MDL, a wholly-owned subsidiary of O'Flaherty Holdings, and the Wolfsburg-based manufacturer which initiated the talks and has driven them forward to their conclusion.
While VW has embarked on similar buyouts of independent importers in other European markets, it denies that this latest move is part of a larger plan to take control of the distribution of its vehicles in all European markets.
The carmaker is impressed by the fact that one in every six new cars sold in Ireland now wears a Volkswagen, Audi or Skoda badge - a success that is thanks to the marques' management at MDL.
Last year, sales across the three brands reached over 36,000 cars and light commercial vehicles, giving the three VW marques a combined share of 16.7 per cent of the passenger car market, and Volkswagen light commercial vehicles a 14.4 per cent market share.
Figures for the first 20 days of this year indicate that sales across the three marques are growing above the general trend. Audi saw sales rise by over 26 per cent in the first three weeks of 2007, while sales of Skoda cars improved by over 17 per cent, and sales of Volkswagen cars rose by 3.5 per cent to account for almost 10 per cent of all cars sold during this intense selling period at the start of the year.
There are no moves by Volkswagen to take control of the distribution of its remaining marque, SEAT, which is imported by Hispano Cars of which O'Flaherty holdings has a 50 per cent stake.
Hispano Cars is a part of another major independent Irish importer, the OHM Group.
But while the German carmaker is full of praise for the work of MDL, it feels it can do better.
"This decision has been taken in order to improve services to customers, to expand our services and achieve synergies between the wholesaler and the manufacturer," said VW spokesman Korn Mann.
Mann confirmed that the company plans to expand its market share in Ireland with the introduction of several offers as soon as the German manufacturer takes over full control here.
Among these will be preferential finance offers for customers provided through the carmaker's own financial services company.
In addition, VW will offer its "mobility" programme for the first time in Ireland. The programme has been a success for the company in several other European countries.
"Volkswagen customers will be offered a value-added package where they can lease a car for four years with insurance, a preferential loan, extended full four-year warranty and all the maintenance of the car included," said Mann. "Volkswagen would rather offer these types of incentives than offer cash discounts."
MDL is a profitable arm of O'Flaherty Holdings whose major shareholders are Michael O'Flaherty (74) and his brother Nigel (69), who is chairman of MDL.
In 2004, MDL made profits in excess of €25 million. That year, however, it had control of Mazda as well VW, Skoda, Audi and Mercedes-Benz cars and commercial vehicles.
From October 1st, 2008, MDL, which is based at landmark premises at the junction of the Naas Road, Long Mile Road and Walkinstown Road in west Dublin, will have lost the best selling models from its range and will be distributing just Mercedes-Benz cars and commercial vehicles.
As part of the agreement with Volkswagen, MDL will establish a new company named Volkswagen Group Ireland later this year into which all VW import businesses will be transferred.
While it is certain the managing director of this new company will be appointed by Volkswagen, the agreement stipulates that all 120 MDL employees who currently work across the three marques will continue on the payroll of the new company.
In addition VW has also confirmed that all Irish Volkswagen, Audi and Skoda dealers will have their contracts renewed under the same terms as with MDL, including the MSL dealer group, which is owned by Motor Distributors.
"All dealers including those connected to MDL will have their contracts renewed," confirmed Mann.
Stefan Jacoby, Volkswagen's executive vice-president of marketing and sales, added: "For us, this demonstrates a clear commitment to the Irish market, which we plan to develop further in co-operation with MDL and Irish dealers for the benefit of our customers."
MDL has represented Volkswagen since 1950 when it acquired the franchise to distribute the Beetle, which was assembled in Dublin and then sold to customers nationwide. In 1967, the Audi franchise was acquired, followed in 1993 by the introduction of Skoda.
While neither company would disclose the level of compensation paid by the German carmaker, which is Europe's biggest, Volkswagen AG did confirm that a compensation payment was part of the agreement.
The figure is believed to be a substantial eight-figure amount.