Citroën's Irish distributor is to close and the economy being blamed. However, Citroën damaged its reputation with its discounting policy. PADDY COMYNreports
THE BLAME for much of the ills of the Citroën brand’s fortunes in Ireland can be traced not just to the ability of the brand’s distributors, Gallic Distributors, or indeed the global economic downturn, but much further back than that, to the erroneous discounting policy which wrecked the brand’s status within the Irish motor industry. That is the view of one former Citroën retailer, Pat White.
“We had the Citroën franchise from 1983 until we closed the premises in March this year. I think where it went wrong is that you have a manufacturer, you have a dealer and, in the middle, you have a distributor – and the cake gets smaller by the time you get to the dealer. You can get a better margin by dealing straight with the manufacturer. The distributors charged for brochures, charged a lot for training and diagnostic equipment and this equipment was being used to work on warranty claims. We found it difficult to make money with Citroën and found it difficult to hang on to the agency.”
White, however, points to the firm’s policy on discounting as one of the main reasons for Citroën’s demise. “In 2006, we did a large amount of lease cars, and those cars would come back in September. We had all our lease cars back and Citroën reduced the price of their new cars by the VAT amount. Dealers had these cars coming back dearer than the new cars. In doing the discounting that they did, they did untold damage to the value and reputation of the product. The discounting destroyed the product.”
The discounting policy was also employed in the UK, where it had a similarly poor effect on the market. Chas Hallett, editor of Autocar, told The Irish Times: "Citroën's discounting policy did give them a negative in the UK. However, in the past 12 months, some of this has reversed because of less discounting and much more desirable models."
Niall Costello, sales and marketing director of Citroën in Ireland, says that at the time, discounting was just part of a European policy. “When the prices were harmonised across Europe you need to harmonise your offers and when this policy was employed in other markets, they had to be used here or else your cars were overpriced. If we had it now, it would be flavour of the month. It is a matter of timing. You see all the discounting now. We tried our offer in 2006 in a booming economy and it wasn’t something that the customers went for.”
He refutes the claim that margins were tight. “Margins were going to be okay for dealers. Dealers give away their margins anyway, if you are coming to a dealer to get a discount, he is going to trade his margin with the customer. There should be enough profit left for the dealer.”
Costello says that he isn’t sure whether the new company will be a new Irish-led company or a subsidiary of the UK, but he says it will be a factory-owned enterprise. “It will be a Citroën entity. Whether they are going to operate it on the back of the UK operation or set up their own company, I’m not sure. That is only going to play out this week.”
The brand’s image in Ireland was also tarnished after some of its dealers, who were members of the Citroën Dealers Association, were convicted of price-fixing by the Competition Authority. The dealers were found guilty of agreeing to implement a scheme between June 24th 1997 and February 15th, 2002, which had as its object the prevention, restriction or distortion of competition in the motor trade in Leinster, “by directly or indirectly fixing the selling price of Citroën vehicles”. These dealers had an agreement that the cash price for a new car would not go below a certain limit.
Delivery charges were also fixed, as were prices for metallic paint and other accessories, and members were given a pocket-sized laminated card which detailed the prices.
Citroën’s European headquarters were contacted but were unavailable to comment by the time we went to press.