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German pharmaceutical group Bayer and motor dealership Pendragon


German pharmaceutical group Bayer

You will probably be aware that Bayer is feeling the aftershocks of its acquisition last year of Monsanto as a California jury ruled last August that it should pay damages of $289m following allegations that the glyphosphate-based weedkiller Roundup, first sold by Monsanto in the 70s, caused cancer.

Over 13,000 similar cases have now been lodged and the company’s share price has fallen by 30% over the last year.

However, the share price bounced in trading this morning on news that the company is now addressing the tsunami of glyphosphate litigation by putting in place a special supervisory board committee to concentrate on the group’s legal strategy and hiring a new lawyer.

The company needs as much help as it can get at the moment given that one trial earlier this year led to a damages award of over $1bn so it would appear that it is taking some proactive steps. Good news for Bayer, not so good for all the litigants.

Motor dealership Pendragon

The other thing I wanted to talk about today was Pendragon, the UK-based car dealership which owns Stratstone and Evans Halshaw.

Basically, its chief exec Mark Herbert is leaving after less than three months in the post after disagreements over the company’s strategy of focusing on used cars.

Herbert’s predecessor was trying to move the company away from new cars where it was restricted by being beholden to car manufacturers to putting more emphasis on secondhand cars where they would have more control.

In his brief time in the top job, Herbert announced a profit warning and a strategic review of the company, which will now be postponed. The company’s COO and CFO will lead the company until they find a new chief exec.

On the one hand, I can see the attraction of having a bit more control over your own destiny with secondhand cars but then if current trends continue with fewer people owning cars outright and just handing them back after a few years, I would have thought that exposure to new cars may be the way to go because at least they’ll get SOME sales, whereas secondhand car values could fall off a cliff.

However, I would also contend that the number of dealerships could decrease as more manufacturers try to cut costs by selling directly to customers and by-passing dealerships to some extent.

Mind you, when Tesla recently tried and failed to cut its dealer network out entirely, it faced such a strong backlash that it had to do a U-turn. This is a very tough area at the moment.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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