The motor retail sector has been consolidating, with market leader Pendragon buying Reg Vardy for £450m. But small North-East retailers, such as Patterson Ford, are looking at ways of competing with the big players. Business Editor Julia Breen reports.

BOTH are historic North-East companies, both are family-run, but the stories of Reg Vardy and Patterson Ford are very different.

Patterson Ford was set up in 1911 by RH Patterson as an engineering company, making mining equipment.

History tells us that Mr Patterson built the crane that put the two halves of the Tyne Bridge together. The same crane was eventually exported to Sydney to help build Sydney Harbour Bridge.

But in 1926, Patterson caught the eye of motor conglomerate Ford, which was touring the UK offering franchises.

Eighty years later, Patterson still holds one of the oldest Ford franchises, along with main rival Jennings.

But recent years have seen Patterson Ford, which employs 350 people, having to change with the times.

While Reg Vardy became a successful motor retailer in itself, the family-run company has sold its interest. The Reg Vardy name will soon disappear from the old showrooms, now owned by Pendragon.

Patterson Ford on the other hand, run by Ashley Winter, who is following in the footsteps of his father and grandfather, will never float on the stock market.

Mr Winter's grandfather was company secretary when Mr Patterson died in the 1930s, and took over the running of the company, which was passed down to Mr Winter's father and uncle, then on to him when his father retired 18 years ago.

While Mr Winter does not rule out mergers or even takeovers, he says he has never been tempted by the City, even though Patterson is one of the largest private Ford dealers in the UK.

Patterson's main site is in Scotswood Road, Newcastle, or "motor alley" as Mr Winter calls it where the company has been since the 1960s.

It was only a Ford business until about 15 to 20 yeas ago, when it took over a small Renault business in Berwick, which has since been sold.

The business now has four showrooms, three for Ford, at Scotswood Road, Shiremoor, near Whitley Bay, North Tyneside, and Hexham, in Northumberland, and now a Seat franchise in Scotswood Road as well, the first time Patterson has moved away from Ford. It also has a £3.5m accident repair centre in Scotswood Road.

New European legislation has allowed the company to branch out - before, Ford had prohibited any franchise holder from having an alternative franchise within 20 miles.

Mr Winter says: "We hadn't actively gone out to look for other franchises, but we were building the repair centre, had room for a small showroom and we were lucky that the Seat franchise became available."

Patterson also has a thriving commercial vehicle business, based behind Newcastle's Central Station, in Forth Street, specialising in transits. Its biggest customer is Darlington plc Northgate, the largest van hire business in the country.

Mr Winter says: "Expanding just with Ford is difficult, because all the franchise holders are so big.

"We turned over £215m last year and I am confident we will do more this year - at least £225m.

"The market was down and very competitive, but it was the best year we had, partly due to the extra Seat sales."

In the next year, Patterson hopes to sell its valuable original site in the centre of Newcastle for good price, and develop a £2m commercial vehicles centre elsewhere.

It has also come up with an inventive way of competing with bigger rivals like Pendragon, which have huge buying power.

Mr Winter says: "One thing we have done recently was that we could see what was happening with people like Pendragon and their ability to buy parts and oil was far greater than ours because they are so big.

"We got together with 21 private dealers and formed a buying group that we call the Retail Automotive Alliance to pool our buying capacity.

"There are 22 companies involved with a combined turnover of well over £2bn, so if we were classed as one group we would be second only to Pendragon in terms of size.

"However, we're not a merged group, but more of a buying brand doing deals with oil companies and the like."

But Mr Winter remains unfazed by Pendragon, even if it does take over its main rival, Lookers. He said: "While Pendragon is huge in our sector, even if it takes over Lookers, it will still only have a market share of six per cent. If you look at Tesco, which has a 30 per cent share of its market, it doesn't compare well. However, there are still huge consolidation opportunities across our sector."

Mr Winter predicts consolidation in motor retail will accelerate, but does not believe manufacturers will like too many large plcs in the sector.

However, when it comes to merging Patterson, or being bought out, he says: "You can never say never, but it is not on our radar.

"I have been here all my working life and I'm very conscious of the fact that we are responsible for 350 families, some of whom have worked here for many years.

"I don't plan to sell out, but we will continue expansion. We're not looking at anything at the moment but will seize opportunities when they come up."