CMC new owners end contracts of three sales agents

Corporate News

Al-Futtaim Group corporate development group director Marwan Shehadeh (right) and automobile president Len Hunt at a past Press briefing. PHOTO | PHOEBE OKALL 

By VICTOR JUMA

In Summary

• CMC Holdings terminated the services of Pewin Motors, Peak Showcase and Superstrike Equipment Services on July 1.
• The agents, who were hired from 2011, were charging a commission of up to six per cent of gross sales.
• The firm says brokers were hired by former management on controversial terms

The new owners of motor dealer CMC Holdings have terminated the contracts of three sales agents who were allegedly hired by the company’s former managers on controversial terms.

Mark Kass, the new chief executive of CMC who was appointed by the firm’s new owners Al-Futtaim Group, terminated the services of Pewin Motors, Peak Showcase and Superstrike Equipment Services on July 1.

The agents, who were hired from 2011, were charging a commission of up to six per cent of gross sales.

From now on CMC will use its own sales force to represent it in procurement of motor vehicles by the central and county governments,” Mr Kass said in an interview.

“CMC will no longer use brokers or agents. This is the biggest decision I have made so far,” he said, adding that the move was informed by the large amounts of money the agents were being paid as per their contracts.

Mr Kass declined to disclose the cumulative payouts to the agents but said the figure runs into hundreds of millions of shillings.

He said Dubai-based Al-Futtaim is determined to run CMC in an ethical manner, away from the past when it relied on political connections to win government tenders.

Mr Kass said the shift in strategy will see the company expand its sales force, besides saving large sums of cash that were previously paid out to the agents.

South Africa’s Webber Wentzel, a forensic audit firm that reviewed the motor dealer’s contract with Pewin, described the deal as burdensome to CMC.

Pewin, whose managing director is Peter Kirigua, was appointed in June 2011 by CMC’s management team that was then headed by former CEO Bill Lay. It was not immediately clear who hired the other agents.

The appointment of Pewin was one of the issues that sparked controversy at the motor dealer after Peter Muthoka who chaired the board at the time opposed the use of sales agents.

Mr Lay defended the Pewin contract in an interview with Webber, arguing that it was necessary to curb corruption in sales to the government.

He said his assessment of CMC’s relationship with the government, a month into his tenure, was that it was unprofessional and vulnerable to corruption.

In Mr Lay’s view, Pewin was to act as a professional intermediary to manage the relationship and regularise the company’s government procurement business.

The structures of the contracts were, however, skewed to disproportionately benefit the agents at the expense of CMC. For instance, Webber found that Pewin was paid commissions even on sales in which the motor dealer made a loss.