"Prepare for a brutal future" Farley Tells Dealers

[blwnsmoke]

https://carbuzz.com/news/ford-dealers-told-to-prepare-for-a-brutal-future?utm_medium=social&utm_source=facebook&utm_campaign=carbuzz-facebook&utm_content=post

 

"We've got to go to a non-negotiated price. We've got to go 100 percent online. There's no inventory, it goes directly to the customer. And 100 percent remote pick up and delivery," said Ford CEO Jim Farley. 4

 

 

[Sherminator98]

But this also when BEVs become more prevalent in the lineup too. When the most successful BEV manufacture does this, it raises eyebrows and the vast majority of buyers don't like dealing with the current dealership model. 

 

Outside of buying a home (and that most of the time favors the seller), there really isn't another sales model that uses this approach. 

 

Plus I'm betting Ford is seeing that it is much more profitable this way then the old overproduce model that has been going on for the past 50+ years. 

[Captainp4]

Don't the dealers on here tell us all the time they don't make much if anything on sales? Sounds like this can save them the overhead of a sales staff that doesn't pull in much profit anyway. Focus on service and have a few people there to get people in their new rides when they show up, or walk them through the online process with a set price (or do it for them and have them sign where they need to for the older non tech savvy people).

[GearheadGrrrl]

There's a handful of dealer chains that are public corporations (they issue stock) and thus have to publicly report their financials and break down profit by area. Pre-COVID they usually reported single digit profit margins for new and used sales and profits ranging up to around 30% for parts and service. With the current auto shortage those sales profits have improved a bit. In this brave new world of new car sales at MSRP which is the same as Invoice price dealers will only have Holdback and other incentives to cover the overhead of new car sales and hopefully turn a profit. The good news is that this new sales model will reduce overhead substantially as expenses like sales staff salaries, flooring cost, and acres of storage space are reduced.

[Footballfan]

Bad idea to piss off your dealership network.  A lot of people like to see and touch their vehicle before they by it.  A dealer helps answer the questions the customer has and is the ambassador for the company.  

[justins]

Honda and Mercedes have gone to this model here in Oz. 

 

Set prices, no negotiation, dealer acts as agent, gets a fee for "handling" the vehicle. The automaker is the "dealer" and owns the (one) dealer license. 

[jpd80]

 

I think Ford has already walked back  most of what Farley said to just online digital sales contracts with buyers

[justins]

1 hour ago, jpd80 said:

 

I think Ford has already walked back  most of what Farley said to just online digital sales contracts with buyers

 

Yeah, but I see cases like Oz being test cases towards everyone doing this wherever they can. Manufacturers get the full retail margin, minus a handling fee. Tesla have shown it works. 

[7Mary3]

And so it begins...  Please submit your resumes to 1 American Road, Dearborn MI. 48126.  Automotive experience a plus, but not required.   

[blwnsmoke]

16 hours ago, Footballfan said:

Bad idea to piss off your dealership network.  A lot of people like to see and touch their vehicle before they by it.  A dealer helps answer the questions the customer has and is the ambassador for the company.  

 

Yet the majority of customers know more than a salesman.

[mrbill973]

17 hours ago, GearheadGrrrl said:

There's a handful of dealer chains that are public corporations (they issue stock) and thus have to publicly report their financials and break down profit by area. Pre-COVID they usually reported single digit profit margins for new and used sales and profits ranging up to around 30% for parts and service. With the current auto shortage those sales profits have improved a bit. In this brave new world of new car sales at MSRP which is the same as Invoice price dealers will only have Holdback and other incentives to cover the overhead of new car sales and hopefully turn a profit. The good news is that this new sales model will reduce overhead substantially as expenses like sales staff salaries, flooring cost, and acres of storage space are reduced.

 

Just an FYI, pre-covid, a typical dealer would/will make 8-9% on the MSRP, this does not include holdback, or any other incentives. Post Covid, this has not changed, just the biometric in how it is reported. By not carrying a large inventory, the weekly/monthly costs to floorplan that inventory is also reduced. This lower overhead has a trickle down affect. Short term negatives, this will cost salespeople their jobs, as it will not take 6-12 salespeople to take care of the lower volume coming in to the dealership to write a contract. Most of this will be handled online, with the purchaser coming in to review and sign the contract with a sales manager, or, if Ford can get it's act together, just have an "E Sign" option, in which case, you will see a customer coming in to see "A" vehicle they are interested in, similar to Tesla retail locations, then go home and place their order, then have that ordered delivered to their nearest, convenient, dealership of their choice. I suspect those type of orders will have a profit point that is split between dealerships that overlap coverage in a specific territory. Or, you will see older, smaller, mom and pop style dealerships just cease to exist, as Ford has attempted in the past.

 

Bill

[rperez817]

17 hours ago, Footballfan said:

A dealer helps answer the questions the customer has and is the ambassador for the company.  

 

When it comes to BEV, historically too many dealers are ambassadors only for the spread of lies, misinformation, or inability to assist customers. In one study a few years ago involving BEV mystery shoppers, mostly in CARB ZEV states, they found the following. Want to Hear Something Crazy About EVs? Go to a Dealership | by Brigette Schoenung | Charge Ahead | Medium

 

• On one recorded occasion, the dealership told a study participant they had one EV, had lost the key, and encouraged her to buy an ICE vehicle.
• On another occasion, a potential customer called a dealership in a ZEV state to be told they were not authorized to have EVs and the staff were not prepared to sell them.
• One dealership told the customer they had no EVSE because it costs $150,000 to install a charger.
• One man found two EVs on the lot, only to be told neither was charged enough for a test drive.
• Another participant in Texas found no [Chevrolet] Bolts on a lot. When the salesperson called their headquarters, the customer was told there not was a Chevy Bolt within a thousand miles of his location.
• A woman visited a dealership in a ZEV state to be told by the dealership owner he did not and would not have any EVs on site, and he would personally only sell one if the state forced him to.
• At another dealership, the participant asked about tax credits and rebates only to be told the sales staff had been instructed not to bring that up as they were “not tax experts.”
• Another was told the dealership had one person who understood EVs, but he was out, and they had to come back another day.

Edited June 6, 2022 by rperez817

[GearheadGrrrl]

On the other hand, you've got good dealers like Mankato Motors who I've bought two VWs from. They also carry Nissan and a decade ago when the Leaf first came out they flat bedded another dealers demo nearly a hundred miles so a customer could test drive it.

[rperez817]

19 hours ago, silvrsvt said:

Plus I'm betting Ford is seeing that it is much more profitable this way then the old overproduce model that has been going on for the past 50+ years. 

 

For sure silvrsvt. Farley's recommended approach should be much more profitable for Ford and Ford dealers alike.

 

It's amazing that the old, awful business model for retailing new cars and light trucks (overproduction on the part of the automakers, huge stock of new vehicles on dealer lots, and excessive sales incentives across the board) has survived as long as has in the U.S. Good riddance!

[jpd80]

6 hours ago, rperez817 said:

 

For sure silvrsvt. Farley's recommended approach should be much more profitable for Ford and Ford dealers alike.

 

It's amazing that the old, awful business model for retailing new cars and light trucks (overproduction on the part of the automakers, huge stock of new vehicles on dealer lots, and excessive sales incentives across the board) has survived as long as has in the U.S. Good riddance!

The irony is that manufacturers would have never dream of intentionally cutting production and sales by this much yet profits have not be hit as severely as expected. ICE manufacturers now realising they can make more money by building and selling fewer vehicles while Tesla rolls out huge production facilities……..we live in very interesting times

[rmc523]

29 minutes ago, jpd80 said:

The irony is that manufacturers would have never dream of intentionally cutting production and sales by this much yet profits have not be hit as severely as expected. ICE manufacturers now realising they can make more money by building and selling fewer vehicles while Tesla rolls out huge production facilities……..we live in very interesting times

except imo it’s a fine line…..you can only cut back so much sales/volume before people just plain start looking elsewhere.

[Tico]

Most people under 40 will go for the online buying experience most of the time.  Even many between 40 and 60 know to search new / used inventory online and then go to the dealership already interested in a specific vehicle that is supposedly in stock. I have to agree 99% of the time I know more about the car I want than the sales person does.  Also I hate negotiating a price when I just want the out the door price and then an offer for my trade, while they just want to keep playing the monthly payment shell game where they don't want to tell you the length or interest rate of the loan or the new car / trade value in the contract until you are ready to sign to a specific monthly payment. Finally I dread the sales pitch for the extended warranty options none of which do I want, but the poor finance person is rewarded / punished based on how much extended warranty they sell.  Also I always finance through my credit union, dealer options are rarely better and often worse if you read the fine print.  Like if my payment is 500 and I send 1000 this month, my credit union says, hey buddy your paid up for two months next payment due in August or you can send more in July and pay it down farther, or not its up to you!.  Ford says that nice you sent extra, you still need to pay the regular payment in July.  No one talks about these things but they matter! Overall its a horrible experience. These people have the state legislatures in their pocket with campaign donations that is the only reason the current system still exists. 

I have never been to a Tesla show room but why can't I go test drive a model / trim I am interested in and ask question and then go home an order when I have done same with competition?  Extended warranty would be check box on the web order form like apple care for iPhone or iPad. 

 

I refinanced my house during the pandemic all from my living room with my little local credit union.  Why can't I buy a car this way too?  Carvana will drop off a car to me and pick up my trade.  Its 2022 I am sick of car dealers operating like its 1978! 

 

Old people can have their kids help them.  I help my elderly father with his last vehicle  purchase.  

 

How does Telsa warranty service work?  This is where a Ford show room / service center will still be needed perhaps.  Maybe they have to send someone to pick up the car / drop off a loaner.  But I hate many dealer service centers also as I go in for a recall and they tell me I need other non warranty repairs that my local NAPA mechanic tells me the next week I don't need yet or at all. As soon as the 3/36000 is up the my cars usually never see the dealership service center again. The NAPA guy might have to work a little harder to fix the more complex problems, but he never tries to sell me what I don't need and is generally 25 to 33% or more less than dealerships. 

 

OK. I am done venting. I say losing the dealers to Ford owned show rooms and service centers is the lesser of two evils.

Edited June 6, 2022 by Tico

[jpd80]

36 minutes ago, rmc523 said:

except imo it’s a fine line…..you can only cut back so much sales/volume before people just plain start looking elsewhere.

My point was that Ford and other manufacturers would never have done it willingly and yes, the cut backs are too severe to properly serve the market. It also shows that a lot of Ford’s vehicles make little profit beyond covering development and manufacturing costs, forcing Ford to prioritise builds to a more profitable production mix has revealed products in the ICE business that aren’t seen as  essential…..

[rperez817]

3 hours ago, Tico said:

How does Telsa warranty service work? 

 

Tesla operates its own network of service centers in all of its major markets throughout the globe. In the DFW Metroplex for example, there are Tesla service centers in Dallas, Fort Worth, and Plano. Tesla Service Centers in United States | Tesla

 

For Tesla customers who live far from a service center, the company offers mobile service. Mobile Service Support | Tesla

[akirby]

3 hours ago, rmc523 said:

except imo it’s a fine line…..you can only cut back so much sales/volume before people just plain start looking elsewhere.

But they’re not cutting back.  They’re bringing out new models to replace the old ones.

[Sherminator98]

25 minutes ago, akirby said:

But they’re not cutting back.  They’re bringing out new models to replace the old ones.

 

I think the point trying to made is there is a considerable amount of people who just "buy a car" without planning it like a upcoming military campaign. 

 

Its going to be an adjustment for a lot of people to order a car vs just getting one on the lot-what do you do if you total out a car and have to wait 60 days for a new one? I guess that could be a new insurance offering-offer a rental till your new car comes in vs waiting for it to be repaired...never had that situation thankfully.

 

Plus how are dealer trades going to work etc?

 

I know my brother in law had a situation with his 3-For some reason when it came in he didn't get it and had to wait for the next one. I'll have ask him or my sister what the deal was. It worked out for me-I got my Fusion because of that. 

 

 

[akirby]

18 minutes ago, silvrsvt said:

 

I think the point trying to made is there is a considerable amount of people who just "buy a car" without planning it like a upcoming military campaign. 

 

Its going to be an adjustment for a lot of people to order a car vs just getting one on the lot-what do you do if you total out a car and have to wait 60 days for a new one? I guess that could be a new insurance offering-offer a rental till your new car comes in vs waiting for it to be repaired...never had that situation thankfully.

 

Plus how are dealer trades going to work etc?

 

I know my brother in law had a situation with his 3-For some reason when it came in he didn't get it and had to wait for the next one. I'll have ask him or my sister what the deal was. It worked out for me-I got my Fusion because of that. 

I think you’ll still see a small inventory of ICE vehicles in stock with 2 or 3 trim levels like Honda used to do with DX, LX and EX models.

 

But I do t think it will be too tough for folks to adjust to ordering - it’s already happening in so many other areas.

[rperez817]

2 hours ago, silvrsvt said:

Its going to be an adjustment for a lot of people to order a car vs just getting one on the lot-what do you do if you total out a car and have to wait 60 days for a new one?

 

Used cars can handle that situation perfectly. Jim Farley spearheaded initiatives to upgrade Ford's digital infrastructure for both new vehicle sales (through an improved online ordering and delivery experience) as well as used vehicle sales (through the Blue Advantage program).

[Deanh]

On ‎6‎/‎5‎/‎2022 at 6:10 PM, jpd80 said:

 

I think Ford has already walked back  most of what Farley said to just online digital sales contracts with buyers

yep....hes also backtracked quite a bit...case of putting ones foot in ones mouth...ultimately if this does happen its raft with issues and problems...and we all know how Ford Corporate handles those..."Please contact your dealer....." Pipe dream right now, so don't get too excited my Millenial bretheren…..

[Deanh]

20 hours ago, rmc523 said:

except imo it’s a fine line…..you can only cut back so much sales/volume before people just plain start looking elsewhere.

you didn't mention the absolute impatience current society has . Theres...thankyou to cell phones and a dot com mentality, a severe case amoungst individuals for instant gratification...if its not quick and conveinient the ability to remain focused wanes almost immediately....THIS is the big issue with anything ordered online....orders that fall through....but yeah...lets cater to the squeeky wheels that deem the Dealer model disposable because it doesn't fit THEIR selfish needs....thank GOD I don't think Ill remain in this business too much longer...its much like the 1 - 3% "wokists" bleating and whining, getting their way and counting victories...just a matter of time before the majority wakes up and states "Hold on...WTH is going on here..? " There WILL be backlash....just a matter of time..