THE residual value crisis sweeping the contract hire and leasing industry has claimed its first victim, with dealership group William Jacks axing its AutoMotive Strategy arm just 18 months after launch. The move comes at a time when, after almost two years of tumbling residual values, the industry is increasing its rates to offset projected disposal shortfalls.

It also shows the contract hire business is following the trend in the daily rental sector of smaller firms being driven out of business. William Jacks said it considered there was 'little prospect of orderly and profitable business conditions returning to the industry in the near future' and warned that other companies were likely to follow its move as the depressed state of the used vehicle market put a further squeeze on margins.

The decision comes a month after William Jacks - listed at 36 with a turnover of £186 million in the AM100 list of top 100 dealer groups compiled by Fleet News' sister publication Automotive Management - issued a profits warning. John Adair, chief executive of William Jacks, said: 'From the middle of 1999 we started to think about closing the business because there was no light at the end of the tunnel. What has happened to us will happen to others as well.'

As a result of what Adair called a 'very difficult but sensible commercial decision', finance director Peter Smith and two account assistants will remain at the Redditch office for a year to manage the 750 vehicles currently on contract with 29 customers. About 150 vehicles with three-year contracts will be then be managed in-house by William Jacks.