Ford Cutting Dealerships Faster Than Expected

[Joe771476]

Now I'm getting a little scared. The Ford dealer in Glastonbury CT seems to have a lot less cars on the lot lately. This town is Ford city! There's only 40,000 people or so but I bet there's 30 landscaping businesses (there are hundreds of $1 million houses in town) and just about ALL the trucks are Super Duties! Up until Ford stopped making school buses, ALL the buses were B700's! When you see 10 trucks in a gas station at 4:00AM getting ready to plow they're all Fords! The Ford 500 and Freestyle sell like hot cakes here! Get the message? If they leave, Ford loses! On an unrelated note, there are also a lot of Jags, LR's and Volvos on the road here too! If the consumer has to go to a new or different dealer, he might not go to a Ford dealer the next time! I see real doom for Ford if this is there way forward plan! I see it as the way backward.

[ShockFX]

Now I'm getting a little scared. The Ford dealer in Glastonbury CT seems to have a lot less cars on the lot lately. This town is Ford city! There's only 40,000 people or so but I bet there's 30 landscaping businesses (there are hundreds of $1 million houses in town) and just about ALL the trucks are Super Duties! Up until Ford stopped making school buses, ALL the buses were B700's! When you see 10 trucks in a gas station at 4:00AM getting ready to plow they're all Fords! The Ford 500 and Freestyle sell like hot cakes here! Get the message? If they leave, Ford loses! On an unrelated note, there are also a lot of Jags, LR's and Volvos on the road here too! If the consumer has to go to a new or different dealer, he might not go to a Ford dealer the next time! I see real doom for Ford if this is there way forward plan! I see it as the way backward.

Pretty sure we're talking about places with 10 dealerships within 20 miles.

[Deanh]

Now I'm getting a little scared. The Ford dealer in Glastonbury CT seems to have a lot less cars on the lot lately. This town is Ford city! There's only 40,000 people or so but I bet there's 30 landscaping businesses (there are hundreds of $1 million houses in town) and just about ALL the trucks are Super Duties! Up until Ford stopped making school buses, ALL the buses were B700's! When you see 10 trucks in a gas station at 4:00AM getting ready to plow they're all Fords! The Ford 500 and Freestyle sell like hot cakes here! Get the message? If they leave, Ford loses! On an unrelated note, there are also a lot of Jags, LR's and Volvos on the road here too! If the consumer has to go to a new or different dealer, he might not go to a Ford dealer the next time! I see real doom for Ford if this is there way forward plan! I see it as the way backward.

don't be...the better more fiscally solid dealers will remain, good product on the way will help immensley, and less dealers will be beneficial to the remainder and that will pass on to a better dealer experience for the customer....I do find the loss of older established dealers due to lack of sales ( and THAT is partially to do with product ) dis-concerting and sad though....i just hope those looking for career change land on their feet.

[scode1]

There -is- a program. Ford is not buying dealers outright.

 

They're extending loans to assist consolidation and offering cash incentives.

 

It's kind of like they're having a 'closeout sale' on dealerships.

 

---

 

 

What they are doing is looking at the most logical/underperforming stores to close. Lets say Dealer A is on the same road as Dealer B and C just spread out by 5 miles each. If B in the middle is not cutting it then it would be the store to close. If B were to close it's doors the owner would want $$$. Ford then tells Dealer A he should get x% of "B" customers and "C" would get the other % if B decides to close. Ford will give B some $$ to close its doors but "A" and "C" have to buy out the rest of what is deemed fair on a percentage basis. That in a nut shell is what is happining. If B" says he is not selling no matter what, I am sure the factory can find a way to starve him of product so that the store becomes a Black hole of red ink. Gone are the days of the service department picking up 100% of the absortion ratio. The quality is so good these days that our service techs feel like the maytag repair man.

[Former Ford ZM]

Ford Division is looking at the major metro areas around the nation, where there are multitudes of dealers within a distance as it has been pointed out. Cisco Codina has actually stated on the record that he views the select stores, the small stores that are in the most rural of areas/or very small municipalities are looked upon as "secret weapsons" because they are the closet dealer in many cases for some people. Their closest Toy store is 60 minutes away, granted some customers will drive all the way to buy one, but when it comes to farming communities and such, they know and depend on Ford trucks.

 

I heard various rumors of "buyouts" when I was with the company. In fact one dealer once mentioned he "heard a store in another state was offered their original investment in exchange for giving up their sales and service agreement. They'd been losing money for years and jumped at it." I don't know how true that is, but I do know that on a region by region basis, when a dealer approached market representation saying "I want out" the company would help by setting up a purchase by fellow dealerships. Yes it used to be when a dealership was closed, there was a hustle to put in a new dealer ASAP. It was all about getting that point filled so yes the company could move more metal. However, even during that time, if a dealership was doing poorly in regards to sales and CSI scores, profitability, market pentration, etc, it was the job of a Regional Manager to ask the dealer to "consider resigning." Ford cannot simply terminate a dealer. Best they could do was put them on a cure program, wait a few years, then duke it out in court. Remember, these aren't franchises in the legal sense, they're something else.

 

Which brings me to my final point. Nobody put a gun to these entrepenuers and said, here, sign up to become a Ford dealership. Somewhere, somebody with the means decided to take the risk and enter the business. No one was garuanteed success and profit, and statistically speaking, despite all the requirements, background checks and training, some of them were going to suck. I know I had a few stores that I honestly couldn't care if they disappeared overnight; incompetent management/ownership, absentee owner, to just an all out disregard for the business. Dealers made fortunes, some small, some huge, and it was all because of the blue oval out front. Yes, it's tough to be a dealer, I've seen a few lose lots of money, but I've seen alot of them make money despite it being tough times. I had one dealer bitch at me during a wholesale, "my floorplan expense last month was $40 grand, I can't take anything!" "Bullshit, your salary is $50 grand a month, now take it all so I can at least go home with my $3 grand!" "Wow, how do you live on that?" "Fuck you, just order the cars so people can have a job." That guy later sold his store a few years ago and got into Toyota....I'm sure he's an even bigger asshole today.

[macattak1]

Nice. This was needed.

 

Yea. But it is voluntary. There are probably 200 dealers that need to be closed/forced out and 200 that need a raise for doing such a great job.

[macattak1]

ford was the one responsible for too many dealerships to begin with..it was a case of the prehistoric "More Dealers will sell MORE cars" syndrome.....all they wanted to do was move THEIR metal....and it takes a guy from Boeing of all places to realize the stupidity behind THAT thinking....LESS dealers will mean more profitability to franchaises, better customer service and consequently probably a better quality product due to Ford becoming a more popular brand.....

 

Ummmm, they said this started BEFORE Mulally joined...

[macattak1]

sad thing is this situation was caused thru Fords own initial greed/ ignorance...by handing out so many franchaises they basically saturated the market and I would go so far as to say cheapened their image thru forcing "loss leader advertising' wars between adjacent dealers...less dealers is a good thing, for both the dealers and their employees , the customers ( even though ultimately they will probably pay more $ in relation to invoice due to a less hostile/ competitive/ cutthroat market ) AND Ford themselves.

 

Actually, look back just 10 years ago and Ford was raking in the money and had huge revenue. So I would say that 10+ years ago those dealers were justified. Not just about moving metal. If so, one could say that Toyota, Honda, Mazda are just about keeping the prices inflated due to few dealers. Consumer wise I know which one I would rather have.

[silvrsvt]

I know in my area, I have some serious over penetration of Ford Dealers...with in a 15 mile radius, I have 5 different Ford Dealerships..which is plan nuts! Keeping this in mind, Target only 3 stores in the same Radius and Walmart has 4 stores...I live area between the two counties of roughly 1.5 Million people reside in....there is no reason to have more Ford dealerships then consumer goods store has. They would be fine with just 2-3 dealerships in the area.

[macattak1]

I just can't match your indignation. I don't think you can make predictions on what the market is going to look like in 40 years.

 

I mean, quite obviously, Ford got itself into this mess. I just find it very difficult to be mad at the individuals that did this.

 

There aren't always 'bad guys'.................

 

Richard, you know who your arguing with right? Deanh, the owner of Amazon.com, Yahoo.com, and several other huge at one time future successes. Don't argue with him. Find out what you should own for the next 20 years.

[armadamaster]

Huh..sad thing is I was just thinking the other day that the now vacant Dodge dealership (moved and expanded closer to town) would make a great Lincoln/Mercury dealership, including a sufficient upper middle class that has to drive directly by it to get home everyday making for an ideal customer base. Closest other Merc/Lincoln dealer is 30-45 mins away in the 4th largest city in the U.S. :stats:

[RichardJensen]

That guy later sold his store a few years ago and got into Toyota....

Y'know. You never hear that side of the story from the DPs. All you hear is griping about Ford charging for everything...

[taxman100]

Not to play devil's advocate, but as a buyer of vehicles, I don't see how having fewer dealerships benefits me.

 

Other than warranty work, I never go back to a dealership after I buy my vehicle, and I really don't have much interest in a dealership experience - it is a business transaction to me. I don't overly grind dealers on the price of a car, but a lot of dealers in your market gives buyers more leverage in bidding dealers against each other. If the dealership has not been remodeled since 1970, I don't really care as long as the people are decent and honest.

 

Also, dealerships are leaving because they are not making enough money - so in the long run it might even out.

[Deanh]

Actually, look back just 10 years ago and Ford was raking in the money and had huge revenue. So I would say that 10+ years ago those dealers were justified. Not just about moving metal. If so, one could say that Toyota, Honda, Mazda are just about keeping the prices inflated due to few dealers. Consumer wise I know which one I would rather have.

possibly...BUT the same amount of metal could have been streamed thru fewer dealers....lets face it, its all about the bottom line...having more dealers DIDN"T effect Ford at all....BUT it did effect the dealers as their slice of the pie became smaller and then to compete price wars began...I will say again...Ford didn't give a rats about the effect it had on their dealers....fewer dealers means more units thru each..thus THEIR bottom line is better.....

[Deanh]

Richard, you know who your arguing with right? Deanh, the owner of Amazon.com, Yahoo.com, and several other huge at one time future successes. Don't argue with him. Find out what you should own for the next 20 years.

actually Bill Gates is my bitch...LOL!

[RichardJensen]

Ford didn't give a rats about the effect it had on their dealers....

As the former zone manager said: Nobody forced these dealers to buy a Ford franchise.

 

I find the 'Ford didn't care about the effect it had on their dealers' attitude to be a little one-sided.

 

All these dealers want fewer dealers, but no dealers want to jump overboard.

 

How do you blame -that- on Ford?

 

You gonna blame Ford because they won't buy out a dealer that doesn't want to be bought out? Because they won't spend years in court fighting to justify a franchise suspension?

 

You're just looking at this from the dealer's perspective.

 

Try looking at it from Ford's perspective:

 

You've got all these mangy dealers hanging on by a thread, barely paying the bills, and when you suggest they sell-out and close, you get a big fat, "Buzz off."

 

DPs that won't look out for their own best interests by closing shop don't do Ford any favors either.

[Deanh]

As the former zone manager said: Nobody forced these dealers to buy a Ford franchise.

 

I find the 'Ford didn't care about the effect it had on their dealers' attitude to be a little one-sided.

 

All these dealers want fewer dealers, but no dealers want to jump overboard.

 

How do you blame -that- on Ford?

 

You gonna blame Ford because they won't buy out a dealer that doesn't want to be bought out? Because they won't spend years in court fighting to justify a franchise suspension?

 

You're just looking at this from the dealer's perspective.

 

Try looking at it from Ford's perspective:

 

You've got all these mangy dealers hanging on by a thread, barely paying the bills, and when you suggest they sell-out and close, you get a big fat, "Buzz off."

 

DPs that won't look out for their own best interests by closing shop don't do Ford any favors either.

but rich...Ford was the one that OFFERED the franchaises....of course they were snapped up...at the time they were given out the market was doing well and dealerships were considered easy money by investors ( my how things have changed )....Ford didn't care...if they did they wouldn't have saturated the market...like i said the mentality was ...WE will move more metal if WE have more dealerships and it will put MORE money in OUR pockets.....and hey, I'm happy they are cutting back, but I do feel for the strugglers...no one foresaw the current state of things, BUT I will stand by my statement of cheapening ones image thru saturating the market with a dealer on every corner.....THAT is my take on Fords perspective......

[RichardJensen]

but rich...Ford was the one that OFFERED the franchaises....of course they were snapped up...at the time they were given out the market was doing well and dealerships were considered easy money by investors ( my how things have changed )....Ford didn't care...if they did they wouldn't have saturated the market...like i said the mentality was ...WE will move more metal if WE have more dealerships and it will put MORE money in OUR pockets.....and hey, I'm happy they are cutting back, but I do feel for the strugglers...no one foresaw the current state of things, BUT I will stand by my statement of cheapening ones image thru saturating the market with a dealer on every corner.....THAT is my take on Fords perspective......

Think about it Dean:

 

The 60s were very different. VERY different. The growth of big-box stores was in its infancy, shopping malls were just getting started. The idea of shopping as a 'destination' was extremely novel. Had Ford's sales channel people realized that we would soon be living in a world where a 5 mile round trip (if you're lucky) in a 14mpg SUV to obtain a tin of nutmeg would not seem ridiculous, they might have put the brakes on dealership expansion. But they were in the 'people want to stay close to home' mindset, not realizing that Americans would be spending less and less time at home as the years went by.

 

Also note that other companies that have expanded -to- capacity have found it easier to retrench, to re-establish themselves (Holiday Inn is a good example---many of the original properties built in the 60s have lost the franchise, as Holiday Inn Express has replaced HI as the 'roadside' motel).

 

I'm not saying that Ford -over- expanded by any measure that was available and sound at the time the expansion was performed. They expanded to capacity, and then capacity changed.

 

Consider how the dealer's insistence on iron-clad "till death do us part" franchise agreements have hampered Ford's ability to 'right size' their dealer body.

 

Had the franchise agreements been less iron-clad, Ford could've done what it has long wanted to do with underperforming dealers: cancel their franchise.

 

-----

 

You are angry at Ford for creating a situation that it was not in their power to fix, nor was it reasonably in their power to predict. I think, looking at the current situation, as well as the inability to forecast the current situation, you should also consider the role that dealers have played in the 'overdealering' of America.

[Deanh]

Think about it Dean:

 

The 60s were very different. VERY different. The growth of big-box stores was in its infancy, shopping malls were just getting started. The idea of shopping as a 'destination' was extremely novel. Had Ford's sales channel people realized that we would soon be living in a world where a 5 mile round trip (if you're lucky) in a 14mpg SUV to obtain a tin of nutmeg would not seem ridiculous, they might have put the brakes on dealership expansion. But they were in the 'people want to stay close to home' mindset, not realizing that Americans would be spending less and less time at home as the years went by.

 

Also note that other companies that have expanded -to- capacity have found it easier to retrench, to re-establish themselves (Holiday Inn is a good example---many of the original properties built in the 60s have lost the franchise, as Holiday Inn Express has replaced HI as the 'roadside' motel).

 

I'm not saying that Ford -over- expanded by any measure that was available and sound at the time the expansion was performed. They expanded to capacity, and then capacity changed.

 

Consider how the dealer's insistence on iron-clad "till death do us part" franchise agreements have hampered Ford's ability to 'right size' their dealer body.

 

Had the franchise agreements been less iron-clad, Ford could've done what it has long wanted to do with underperforming dealers: cancel their franchise.

 

-----

 

You are angry at Ford for creating a situation that it was not in their power to fix, nor was it reasonably in their power to predict. I think, looking at the current situation, as well as the inability to forecast the current situation, you should also consider the role that dealers have played in the 'overdealering' of America.

actually not really angry....I think ford made some horrificly bad decisions over the years when they became too big for their boots....classic was when they snapped up Jaguar, Aston, Land Rover and Volvo, i thought to myself SLOW DOWN...they were buying everything when they thought they were King, decisions in my opinion made by ego maniacs...and look where THAT has led....I have watched a multitude of companies get BIG too quick and think that things will remain as such.....and POOF next day they are gone....hopefully the nimrods that made such decisions are no longer with ford....I wasn't here in the 60's, one of my first memories is watching Armstrong land on the moon ( soundstage..LOL ) on a black and white complete w coat hanger in New Zealand, so i can't comment on that timeframe....I do have one question though.....how can one not have the power to fix a situation THEY created.....my take is they shouldn't have done it in the first place, bad decisions by ignorant greedy blue haired stockholders signing off in the hope they can pad their OWN pockets, like i said...not giving a rats about their dealer base, just their own pockets...more dealers do NOT sell more cars...ESPECIALLY when a stones throw away.....

Edited September 13, 2007 by Deanh

[RichardJensen]

"how can one not have the power to fix a situation THEY created"

 

Three words for you:

 

State-Franchise-Laws

 

It is exceedingly difficult to revoke an auto dealer's franchise. It's not like losing a Holiday Inn franchise, or a Burger King franchise.

 

-----

 

Further, I would not say their actions at the time were characterized by -excessive- greed. Nor were their actions particularly unique. GM expanded to fill the map just like Ford did. The only reason why Chrysler didn't was because they couldn't.

 

Nor would I say that they got too big too quick.

 

The move to provide 'convenient access' according to some formula of households was, at the time, rational even if not necessarily based on the best use of existing trends.

 

Furthermore, the idea that DPs should be millionaires is fairly new. Owning a dealership was once, back when you had smaller showrooms and smaller volume, a somewhat respectable way to enter the upper middle class.

 

Greed on the dealer's part motivated them to try and get the business of the guy two towns over. But even that's not necessarily -excessive- greed.

[Deanh]

"how can one not have the power to fix a situation THEY created"

 

Three words for you:

 

State-Franchise-Laws

 

It is exceedingly difficult to revoke an auto dealer's franchise. It's not like losing a Holiday Inn franchise, or a Burger King franchise.

 

-----

 

Further, I would not say their actions at the time were characterized by -excessive- greed. Nor were their actions particularly unique. GM expanded to fill the map just like Ford did. The only reason why Chrysler didn't was because they couldn't.

 

Nor would I say that they got too big too quick.

 

The move to provide 'convenient access' according to some formula of households was, at the time, rational even if not necessarily based on the best use of existing trends.

 

Furthermore, the idea that DPs should be millionaires is fairly new. Owning a dealership was once, back when you had smaller showrooms and smaller volume, a somewhat respectable way to enter the upper middle class.

 

Greed on the dealer's part motivated them to try and get the business of the guy two towns over. But even that's not necessarily -excessive- greed.

All i am saying is they gave too many too easily...and now its biting them in the a$$...maybe when they gave them out the model plan looked good on paper...in reality it hurt the dealers within immediate vicinities of one another....as for GM and Chrysler...they DO NOT have 10 dealers within a 15 mile radius ( at least here ) GM maybe 5, Dodge who knows ( poor buggers are hurting BIG TIME )...and yes state franchaise laws make things difficult...the answer is not to hand them out like gift certificates to every Tom Dick and Harry along with Jose, Latonya and Akmed to keep the afirmative action bloodhounds at bay. Bottom line....Ford gave out too many to begin with...it was THEIR mistake...BAD decision making and TERRIBLE foresight....ps...GM has wrung every piece of character out of Saab, talk about generic now....

[RichardJensen]

Where I live, there are more GM dealers than Ford dealers. 4 Chevy dealers in a 30 mile radius, 2 Pontiac/Cadillac dealership (one dualled with Chevy), 3 Buick dealerships (2 dualled with Chevy), and two Ford dealerships.

 

Grand total: 6 GM dealerships to 2 Ford dealerships in a 30 mile radius population 250k. 7 if you count a teeny tiny Saab dealership.

 

Don't just judge by your own location, Dean. All the mfrs. did this.

 

And I don't think it's fair to blame Ford for doing what was common practice --in every franchise business-- at the time.

 

You can split the blame 50/50. Self-serving Ford and self-serving dealers. There are no saints here.

[Deanh]

Where I live, there are more GM dealers than Ford dealers. 4 Chevy dealers in a 30 mile radius, 2 Pontiac/Cadillac dealership (one dualled with Chevy), 3 Buick dealerships (2 dualled with Chevy), and two Ford dealerships.

 

Grand total: 6 GM dealerships to 2 Ford dealerships in a 30 mile radius population 250k. 7 if you count a teeny tiny Saab dealership.

 

Don't just judge by your own location, Dean. All the mfrs. did this.

 

And I don't think it's fair to blame Ford for doing what was common practice --in every franchise business-- at the time.

 

You can split the blame 50/50. Self-serving Ford and self-serving dealers. There are no saints here.

hard not to judge by ones own location I swear......So Cal is probably THE most volitile market countrywide, and correct me if I am wrong ...probably sells more vehicles than 99% of all states.....THAT is probably why Ford hande out franchaises like Starbux...one on every corner...LOL! I'm really happy they are trimming the fat, allocations on popular models will increase per dealer, profitability will increase and thus GOOD sales people will be more inclined to stay, customer loyalty will thus increase etc etc etc...up until now I was dependent on Autonation and Sonic ruining / running franchaises into the ground to increase dealers such as my owns market share.......as for the 50/50 not sure I agree...they handed franchaises to some real morons....they can only look in the mirror for that.....visions of granduer can be the cause of some BIG mistakes.....

[Deanh]

quote from another thread...couldn't have said it better myself..........Shrinkage

Ford Motor wants to cut stores to

 

* Increase sales per store

* Improve dealer profits, marketing funds.

[RichardJensen]

<sigh> I keep telling you.

 

There were no visions of grandeur.

 

As far as handing franchises to real morons, well, don't forget that, per Ted Sturgeon, 90% of everything is crap.

 

You will always have half of your dealer principals with intelligence below the group's median. If you want to arbitrarily call them morons, go ahead, but you will always have them.

 

I believe in the 50-50 blame thing because self-centered dealers looking out for their own immediate interests have 1) made this problem a problem, by preventing Ford from eliminating franchises, and 2) they have made the problem worse by refusing to cooperate--always insisting that the burden of consolidation be borne by someone else.