CMC Holdings showroom located in Industrial Area along Lusaka Road. The firm sold 334 units of Ford brands last year compared to 328 units in 2010 while Volkswagen sales dropped to 183 units from 224 in 2010 and 292 units on 2009—a drop that was linked to the freeze in government orders.
What you need to know:
CMC’s sale of JLR brands fell steadily from a high of 661 units in 2007 to a record low of 292 units in 2010, but recovered last year to post 404 units.
CMC sold 334 units of Ford brands last year compared to 328 units in 2010 while Volkswagen sales dropped to 183 units from 224 in 2010 and 292 units on 2009—a drop that was linked to the freeze in government orders.
Volkswagen and Ford Motor Company (FMC) have issued new demands on CMC Motors to build modern showrooms or risk termination of their franchises, says a report by PricewaterhouseCoopers.
The global franchises are worried that the company’s boardroom wrangles and jittery bankers may deny it a strategic focus and funding to push sales of their brands in the Kenyan market.
The two vehicle manufacturers join Jaguar Land Rover (JLR) in demanding that CMC make new investments in their brands in Kenya, piling pressure on the troubled auto dealer.
“On the board meeting of August 18, 2011 it was noted that CMC Group risked losing the Ford, VW, and JLR franchises due to the poor state of facilities,” PwC wrote in its second forensic report dated February 28.
Volkswagen wants CMC to build a modern workshop and a dust-free showroom to better position its brands in the Kenyan market where the German carmaker is unhappy with the sales volumes.
Ford wants the auto dealer to upgrade the existing showroom and build a separate unit dedicated to its brands, a similar demand has been made by JLR in what will shift CMC’s business model since it hosts all models in a single premise.
The three franchise owners account for 70 per cent of CMC’s annual unit sales, underlining their importance to the auto dealer that is racing to reverse its first loss in history.
The firm made a loss of Sh181.1 million in the year to September compared to a net profit of Sh406 million a year earlier.
CMC chairman Joel Kibe, however, said the auto dealer will start investing in new showrooms and upgrade older ones beginning this year to meet the demands.
“The projects will start this year. We are looking at using our retained earnings because borrowing now is costly due to the high interest rates,” Mr Kibe said.
CMC had Sh4 billion in retained earnings as of September, but it must receive shareholder approval to tap the reserves, probably through a bonus share issue. Its annual general meeting is slated for early June.
The firm is gripped by boardroom wrangles tied to claims of inflation of invoices and diversion of funds by its directors – that prompted the capital markets regulator to stop the trading of its shares at the Nairobi Securities Exchange and order an independent audit of its affairs.
The regulator’s reform effort last Monday saw seven directors of CMC, including Mr Kibe, vote out the majority shareholder and former chairman Peter Muthoka and his appointee, Joseph Kivai, prompting the two ousted directors to go to the court.
The protracted boardroom wrangles have since forced the Standard Chartered Bank to suspend its credit lines with the auto firm, which is said to have requested for a rescheduling of outstanding debt, indicating that it is finding it difficult to finance its obligations.
The auto dealer came close to losing the Ford franchise last year after seven investors approached FORD to take over its brands, Bill Lay, the CEO of CMC told his board, according to the PwC report.
“Mr Lay reported that FMC had threatened to terminate the franchise and had written a complaint letter and given six-month notice,” said the report.
Jaguar Land Rover has expressed concern that CMC was losing confidence among its financiers and demanded an action plan from the auto dealer by April 2.
CMC’s sale of JLR brands fell steadily from a high of 661 units in 2007 to a record low of 292 units in 2010, but recovered last year to post 404 units.
CMC sold 334 units of Ford brands last year compared to 328 units in 2010 while Volkswagen sales dropped to 183 units from 224 in 2010 and 292 units on 2009—a drop that was linked to the freeze in government orders.
