Outlook: The AA does a quick U-turn

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The Independent Online
AS CHANGES in direction go, the handbrake turn executed yesterday by the Automobile Association is as abrupt as they come. At first, the strategy was to leverage more profit out of its membership base by selling its 9.5 million breakdown members everything from insurance and route maps to tyre levers.

That plan was comprehensively junked yesterday in favour of concentrating on the core breakdown business.

Perhaps the only surprise about the AA's decision to withdraw from the high street is that it has not done so before. As tragic as the move is for the 850 employees involved, the writing has been on the wall ever since Direct Line showed several years ago that drivers were more than happy to buy their car insurance over the phone.

The AA followed suit and the result is that just one in five of its insurance policies are now bought over the counter of one of its shops.

A couple of years ago the AA would have shrugged and tried to use its trustworthy image to sell some other unrelated service. The result, however, was that the AA took its eye off the emergency services from which it derives its good name. It may still call itself the Fourth Emergency Service but a load of drivers decided to try their luck elsewhere.

With the RAC and Green Flag about to be merged - regulators permitting - and Direct Line picking up thousands of new customers a month with its new breakdown service, competition is only going to get more intense.

John Maxwell, the AA's director general, recognises this and has put the entire business under review. He is closing shops and selling Home Assistance - a failed concept which was supposed to be an AA recovery service for the home.

These are the easy bits. He now has to decide whether the AA should be in things like maps, insurance and driving lessons.

Underlying all this is an overriding question: whether the AA should remain as a mutual organisation. With any windfall likely to be divided between all 9.4m members the financial incentives for potential carpetbaggers are slim.

But the AA has not shown itself to be the most nimble of organisations in the past. With car travel increasingly on the wane, the AA may well end up wondering what it is for in a few years' time.