CMC dealt new blow as Ford terminates franchise contract

CMC Motors in Nairobi. File

What you need to know:

  • Loss of Ford could herald a fresh round of job cuts at CMC, which earlier this year retrenched employees who were made redundant by the loss of JLR.

Motor dealer CMC Holdings has lost its distributorship contract for Ford vehicles in Kenya and Uganda, dealing another blow to the company less than a year after loss of its flagship Jaguar Land Rover (JLR) franchise.

Correspondence seen by the Business Daily indicates that Ford informed CMC of the immediate termination of its franchise last week, giving the auto dealer up to November 30 to clear the remaining stock.

Loss of Ford could herald a fresh round of job cuts at CMC, which earlier this year retrenched employees who were made redundant by the loss of JLR. “ terminated as a Ford Motor Company sales and service dealer in Kenya and Uganda,” read part of the correspondence.

Ford pick-ups and saloon cars are the fastest-selling brands at CMC and accounted for 50.1 per cent of the dealer’s total unit sales last year, underlining the impact of the franchise termination.

The chief executive of CMC’s Kenyan unit, Solomon Muturi, declined to comment on the matter when contacted. The American vehicle manufacturer had expressed unease about the change of ownership at CMC, which was recently acquired by Dubai-based Al Futtaim Group in a Sh7.5 billion deal.

Global vehicle manufacturers are sensitive to buyouts of their dealers by entities they consider to be direct competitors or whose strategies may be different from theirs.

Al-Futtaim response
Al-Futtaim is not a vehicle manufacturer but is a major dealer of Toyota, Lexus, and Volvo, among other brands in the United Arab Emirates.

Executives from the Dubai conglomerate had earlier told the Business Daily that they were in talks with all CMC franchise owners ahead of the buyout, but Ford appears to have had reservations that led to the termination notice.

JLR in December 2012 appointed RMA Kenya as it new partner in the local market, leaving CMC’s contract to expire in February 2013. It remains to be seen how the new owners of CMC will respond to the loss of Ford and JLR — the most valuable among the company’s franchises.

The owners of Jaguar, and Land Rover models cited sub-par sales as the main reason for replacing CMC with RMA. Loss of the two franchises has left CMC with a concentration in the commercial vehicles segment through the Iveco, MAN, Eicher and UD brands. It also has a presence in the saloon car market through such brands as Volkswagen and Mazda.

Al-Futtaim yesterday said it has already paid CMC shareholders who previously controlled 91.6 per cent of the company. The remaining shareholders — who own an 8.4 per cent stake — are set to be compulsorily acquired by the end of this month.

Ford now joins Nissan among franchises that are up for grabs. DT Dobie lost the Nissan and Renault franchises after its parent firm, CFAO, was acquired by Toyota in December 2012.

Renault has been handed to rival Simba Corporation which has signed a joint venture deal with an unnamed foreign investor.

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