Car dealership network Pendragon has confirmed 1,800 staff will be made redundant and 15 stores will close, following a review into the company’s operating model.

Pendragon said the impact of Covid-19 has accelerated the review, which had already begun before the pandemic struck. The board decided a leaner and more sustainable operating model was necessary to safeguard the company’s position in a challenging economic environment.

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Of the 15 store closures, seven were freehold and eight were leasehold. Pendragon said the selected sites were predominantly loss-making and therefore ‘no longer expected to be viable, or are not part of the future network structure between us and our OEM partners’. Combined, these stores made an operating loss before tax of around £2m in FY19.

A total of approximately 400 redundancies are expected from these locations with estimated one-off cash redundancy costs of £1.2m and closure costs of approximately £1m.  There will also be associated lease and asset impairment charges of approximately £5.5m.

The additional 1,400 redundancies are expected to deliver an annual reduction in costs of approximately £35m, with an estimated one-off cash restructuring cost of approximately £5m.

“The above proposals reflect our intention to create a resilient, leaner and more profitable business across the entire group,” said Bill Berman, chief executive of Pendragon.  “These have been difficult decisions for the board to make and our priority now is to manage the transition to our new operating model.

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“The Covid-19 pandemic is a uniquely challenging situation and we want to protect as many jobs as we can sustainably and the proposed redundancies are, of course, extremely regrettable.  During the pandemic we have focused on ways to improve workflow, efficiency and our digital capabilities.   It is paramount that we embed these behaviours into all areas of the business, as we expect the economic environment to remain challenging.

“The actions that we are undertaking are for the long-term health and success of the Group and ensure that we emerge from the pandemic as a more competitive and stronger business with the ability to thrive in the future.

“I would like to take this opportunity to thank every one of our employees for the hard work that has been done to reopen our businesses from lockdown. I am proud of the essential work we undertook to assist key workers during lockdown and for the way we have served our customers in store and online during these difficult times.”