DaimlerChrysler UK and the Mercedes-Benz dealers today announced that they have reached an agreement on the implementation of a new retail strategy.

Both parties in the dispute over the termination of contracts are at this stage declining to give details of the agreement, but an AM-online contact said: "The dealers are smiling."

MB-UK's network and DaimlerChrysler have been locked in a dispute since the company made the decision in December to issue 12-month termination notices as part of a massive revamp of its retail operation. Opponents, united in the Mercedes-Benz Dealers Campaign, were due to take their case against MB-UK to the High Court on Monday. The clash will now not take place.

Dermot Kelly, director of Mercedes-Benz Passenger Cars, said: "We are pleased to have been able to come to an agreement with our dealers which heralds a new era in the motoring retail environment."

"During this period of negotiation we have continued to implement our plan through the acquisition and appointment of new retail partners.

"Preparations for the new format have already begun and we are working to build the structure over the next 24 months with the first of the new dealerships opening in spring 2002. Until then DaimlerChrysler UK will work closely with its dealers to ensure our customers continue to receive the first class customer service and care expected of the world's number one luxury marque."

DaimlerChrysler UK said it had been agreed by each parties legal teams not to reveal details, but that each dealership involved will be dealt with individually.

The AM-online source said: "The dealers are smiling. They didn't stop the network revamp, but they have been given the opportunity to trade in an equitable and profitable way."

It was widely reported before today that DaimlerChrysler would offer Mercedes dealers compensation worth between one and two years' profits and they would be able to choose whether that figure is based on last year's profits or the previous years'.

Alan Pulham, franchised dealer director of the Retail Motor Industry Federation (RMI), said: "This is a memorable agreement that has come about as a result of the commitment of the Mercedes-Benz passenger car dealers to their dealer association, and the work that the association has done in partnership with DaimlerChrysler UK, enabling the whole dealer network to move forward in an equitable manner. This should be an example to all the other dealer associations and manufacturers."

Mr Kelly said: "We remain convinced that our plan will deliver the format that is right for our customers and dealers. It will improve customer service, improve the Mercedes-Benz retail experience, and underpin the growth of our business in the UK. It is customers who will benefit most from the changes. In a fiercely competitive market DCUK cannot afford to ignore the consumer demand for a different and better retail experience."

The £200 million modernisation of the retail format will, says DCUK, increase the number of Mercedes-Benz outlets from 157 to 175, two-thirds of which will be operated by independent dealers, "create and secure more jobs", and "establish a network which is better equipped to compete in the new market place". Three new Mercedes-Benz 'experience centres' in London, Birmingham and Manchester will support the new national network, featuring main dealers, satellites, service stations, and high street retail outlets.