European Motor Holdings has entered the battle surrounding Mercedes-Benz UK and its dealers by questioning the legality of the 12-month termination notices issued last year.

EMH chief executive Richard Palmer called the decision “extraordinary”.

In the end-of-year statement Mr Palmer said: “We were informed in January that DaimlerChrysler wished to operate all Mercedes-Benz dealerships in the London area itself. It is questionable whether the 12-months' notice of termination is legal.

“We are extremely fortunate that within our Mercedes-Benz businesses we control some key strategic locations including an extremely valuable freehold property in Park Royal and the board is currently considering a number of options in relation to these sites.”

Following discussions with its other franchise partners, Mr Palmer is confident that none if its “core” manufacturers “intend to follow the same course of action”.

EMH is in a celebratory mood.

Its preliminary results show profit before tax up 10.2% to £8.5m (2000: £7.7m) on turnover down from £421.8m to £399.7m.

“We have considerably outperformed our competitors in the sector and, in view of the improved trading environment, believe we can look forward to another year of sustained improvement in efficiency and profitability,” said Mr Palmer.

EMH believes that the Government's price inquiry had dissuaded customers from buying new cars. However, confidence was returning to the market. New car sales in March 2001 were “considerably higher than in the same month last year.

“It is too early to be able to be certain that this increase in demand is sustainable for the whole of the new financial year, but our current current performance gives rise to optimism for the year ahead,” Mr Palmer said. He also downplayed the potential impact of next year's Block Exemption review. “Good reputation, good customer service and local representation and knowledge will continue to count and, if new entrants appear, I believe the established dealership infrastructure will more than hold its own.”