By on September 19, 2010

Ford is in pretty good shape now and it’s quite clear that they’ll survive, provided they don’t fall under the huge amount of debt they have. But don’t be fooled that things are safe at Ford. Especially if you’re a dealer.

The Day (based in Connecticut) reports that Jim Farley, Ford’s Vice President of global marketing, sales and service, is looking at reducing the United States’ Ford dealer network further. He would like to see it at under 3,000 dealers for the United States. At the end of 2009, Ford had 3,553 dealers in the United States, but now that Mercury is being put to rest, the existing Lincoln/Mercury dealers (about 276) will find it difficult to stay in business without Mercury. “The dealers are full partners in every decision the company makes,” said Mr Farley, “When you are trying to consolidate your network from 6,000 down to 3,000 the dealers are on your side and they will help you participate in the consolidation.” Of course they are on your side, and of course they will help you, Mr Farley! They’ll try to persuade you to close OTHER dealers, just not their own. So, if you own a Ford dealership and think the sky is the limit with Ford’s newfound success, be careful. Ford might not want you to be part of it. Maybe Hyundai has a couple of spare franchises?

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33 Comments on “Ford Dealership Cull. It Ain’t Over Yet....”


  • avatar
    V572625694

    “The dealers are full partners in every decision the company makes…” Suuuure they are, if they own as much stock as the Ford family, and it’s the right kind of stock. Great to know that Ford talks to its dealers the way its dealers talk to customers.
    It’s always been mysterious to me how car dealers acquired so much political power. Each one was a relatively small business. Maybe the big consolidation that has taken place gave them more muscle.

    • 0 avatar
      Patrickj

      The level of involvement in state/local politics is quite low in most places in the U.S., both in depth of knowledge and number of people.  Therefore, anyone who consistently kicks in a few bucks and takes an interest can have a large influence.
      The dirty secret of U.S. politics is that not that politicians can be bought; rather it is that they can be bought quite cheaply.

  • avatar
    zbnutcase

    Where the hell is my Booth Babe article??????????????????

  • avatar
    GS650G

    Take down the Ford sign, install a Suzuki banner, repaint.

    • 0 avatar
      OldandSlow

      The dealer lot in the photo would be huge for a Suzuki dealer.  Those that remain are usually a tenth that size and are adjacent to a second brand that keeps the new sales department from starving.

    • 0 avatar
      mistrernee

      Fill the lot with Hayabusa`s and Gixxers, with a couple of SX4’s and one Kizashi off in the corner.

    • 0 avatar
      supremebrougham

      I’m not so sure about that one. There was a rather large and nice Saturn dealer in Saginaw, MI that after GM pulled the plug suddenly became a Suzuki dealership. The signs finally got installed a few months ago. I drove past there yesterday and the property was deserted. So much for that idea…

  • avatar
    Patrickj

    What choice does Ford have?
    A dealer can’t survive on Lincoln alone, and it’s not as if any of the remaining Lincoln-Mercury dealers don’t have a Ford store (or three) nearby.
    About 75 feet away in the case of the LM dealer in my neighborhood.

    • 0 avatar
      Silvy_nonsense

      I wonder what percentage of Lincoln/Mercury dealerships are owned by a person/entity that also owns a Ford dealership in the same market? I don’t really expect Ford to ever let that data out, but it would be an interesting factoid.

    • 0 avatar
      mountainman_66

      the local LM dealer near me makes most of his dime selling late model used Fords, Merc and Lincolns.  Not a lot of new product on his lot, he does a good business selling nearly new Fords and has a good rep.

  • avatar

    As I read this article, the term ‘supply & demand’ came to mind. The North American auto makers (used to be Big3) chose to ignore the Japanese imports for decades. They carried on as if it was business as usual, until things got to the point where they realised it was time, actually way past time, to fight back. Of course, it was too little too late. It’s their own fault. If all the imports were suddenly gone, the number of NA auto dealerships would be, or could be, left alone. But of course, that’s all fantasy. Too bad, but again, it’s their own damned fault!

    By the way, the whole North American continent (well, maybe not Mexico) is over-retailed. That’s why there are so many store fronts boarded up on Main Street, and in the malls. And that was before the recession.

  • avatar
    thornmark

    Griffin Ford closed here in CT, Greenwich a few years ago and New Canaan shortly thereafter.  Griffin Lexus took over the real estate in Greenwich and New Canaan is just repairs.

    Those are the two wealthiest towns in the state.  As a kid it seemed half the families had at least one Country Squire in their driveway.   Now you’d be hard pressed to see a new Ford in these environs w/o seeking one out.

    • 0 avatar

      The Station Wagon of course is pretty much history, and trends change. The nieghbourhood I grew up in, in the ’50s and ’60s was very high rent and, as in the ones in CT you mentioned, the ‘wagon was king. The only time you saw a pick-up or van it had the name/logo of some service company that been requested to perform some kind of repair/service (trades to the back door please) Now, many of those driveways have some highly optioned pick-ups & vans in them for mom to put her groceries in the back of, and take kids to school. ‘Crewcab’ types, unheard of back in the day,for extra seating.
      What ever happened to the hoola-hoop?

    • 0 avatar
      Gregg

      I’m not sure the wagon is dead dead. I’ve seen some camo’d Mondeo/Fusion-ish cars running around Dearborn. Gotta be ’12s I guess.  It seems that the first domestic that brings a new station wagon to market would do pretty well with the “Buy American” crowd.

    • 0 avatar
      Silvy_nonsense

      In fairness, you live in an area where the Country Squire was the de-facto ride for established families of means and those who aspired to be perceived as such. The Country Squire was practically the state car of Connecticut.

      If Ford dealers in CT started slapping fake wood on the sides of the Flex, they would probably double sales overnight.

    • 0 avatar
      Patrickj

      @Gregg
      Those mules are likely for foreign markets.  Without CAFE credits to burn, no manufacturer is going to sell any hatchback/wagon weighing over 2500 pounds as anything except a truck–read CUV.
      Volvo wagons, gone.  Subaru Legacy Wagon – gone and replaced with the trucklike Outback for CAFE reasons.

  • avatar
    obbop

    “…at least one Country Squire in their driveway.”
     
    Mom’s small rental house in Patterson, California had bunk beds built in the garage and living room with the section 8 female and toddler renter renting out the bunk beds to illegal aliens.
    Took almost a year to evict the tribe and the damage was in the tens-of-thousands of dollars.
    Mom forbade me to utilize the cleansing aspect of fire.
    I believeth the Country Squire would oh so much preferable.

  • avatar
    carguy

    No surprise there – there are still way too many domestic dealerships and Ford is no exception. I hope they take the opportunity not only to reduce numbers but also raising minimum standards. A big part of buying non-domestic is simply the generally better dealer experience. Now that Ford has a decent product lineup they should also have dealerships to match.

  • avatar
    dwford

    A quick look at the pathetic selection of your local Ford dealer will show you the wisdom of culling a few more dealers. To keep a 60 day supply, Ford is spreading the inventory too thin.
     

    • 0 avatar
      NulloModo

      It probably depends where the dealer is.  Mine has a great selection of inventory right now, but one in a small town about an hour from here has much less.  After the crazy surplus of inventory that many dealers had in ’08 and early ’09, everyone is being more careful how they order.  No one wants to be stuck with tons of year old models that require big discounts to move when they could have the current stuff that be sold for much higher profits.
       
      All in all, less small dealers is better for everyone (well, except for those small dealer and the people who live close to them).  Being able to consolidate more inventory in one place will help, and it willl help stop dealers from competing as much with other Ford stores, and help the dealers that make it through increase their profits.  It will help Ford as a company to save money by simplifying distribution overheard costs.

  • avatar
    dicus

    Hey I know where that is.  It’s in Lima, Ohio.  No one is building a giant Subaru dealership in Lima.  Mike Pruitt (Cleveland Browns) originally built the dealership, then sold it a while back.  It was Lucas Ford for about a year.

  • avatar
    OhMyGoat

    At least three Ford dealers have folded around here (North SF Bay area) over the last few years. Two were newly built and were established dealerships. The closest had been in business for 68 years, but was strong-armed by Ford to relocate from their downtown location to a new “auto mall” near Hwy 80. Between the economy hitting the fan and hassles with Ford, they folded abruptly after less than a year. The local Toyota dealer recently purchased the property and are now in the process of refurbishing it.

  • avatar
    findude

    The local political power of car dealers is easily measured by weighing the portion of the local newspaper that is car ads. Automobile dealerships are the #1 source of revenue for most newspapers, and they are by far the most regular–every day and especially on weekends.  The financial dependence of the media (not just print) on car dealers translates into political power.

  • avatar
    lw

    I would like to see Ford run 2 tiers of dealers.

    Tier 1 – All new Ford product, service and limited high quality used
    Tier 2 – Wide selection of high quality used and full service for all Ford products

    I would drive an hour + to test drive a wide selection and pick up a new vehicle, IF I knew that I had a local dealer that provided certified / top notch service.

    Put the Tier 1 in the prime locations with the population density.  Put the Tier 2 on the outskirts.  Both tiers should have ample opportunity for good margins / profits.

  • avatar
    Dave M.

    All in all, less small dealers is better for everyone (well, except for those small dealer and the people who live close to them).
     
    Nullo, I have to disagree with you on that one.  On my bi-monthly cruise back from Austin I pass 2 shuttered Ford dealers in 150 miles….dealerships that provided small towns with jobs and ranchers with trucks.  Sure, the big city is only an hour away….but the mega-dealerships are not the community linchpin a small, especially family-owned dealership is.

    • 0 avatar
      NulloModo

      Which I why I said that the small communities might be a little worse off not having their local dealer anymore.
       
      However, the way people buy cars has changed.  More and more customers come in having a good idea what the invoice of a car is, what all the incentives are, etc, and most want that pricing or lower, with no consideration for the dealer to make a fair profit.  It’s partially the fault of the dealers for playing the pricing and discount game for so long, but people shop for cars completely differently than they do for other purchases.  No one seems to begrudge Best Buy for making some money on the transaction of a TV, but far be it for the dealer to ask for 5% over invoice for a new car.
       
      Dealerships are also expensive to run.  Air conditioning for a large showroom, advertising costs, big lights for the lot at night, and wages for the non-commission employees all add up fast.  A large enough store can make it work because they can spread the fixed costs across many sales, but for a small town dealer with a smaller group of customers to work from, and smaller profit margins than they had 10 or 15 years ago, the situation is a lot tougher.
       
      Toyota has been smart in their dealer strategy.  The dealers are generally far enough apart that they don’t cannibalize each other for sales, but not so far apart that people won’t drive 45 minutes to an hour to visit one to pick up a car or have it serviced.

    • 0 avatar
      OldandSlow

      When the credit spigot was turned-off at the end of 2008, it just didn’t affect customers, it killed more than a few small dealerships that depended on credit as well.
       
      The Ford dealer in Llano, TX had just recently moved from its old Main Street location, which it probably owned outright, into a new much larger facility on the outskirts of town that it probably owed money on.  It went belly up in early 2009.  Operating costs for a larger facility, paying the mortgage and financing a dealer lot with numerous King Ranch edition quad-cabs is not cheap.
       
      If you are driving towards Austin from Brady and San Angelo, it may seem that the closest Ford dealer is now 70 miles away. Don’t forget there are two dealers within 35 miles via the back roads in Fredericksburg and Marble Falls. The latter has a growing population, while Llano, TX is one of those towns that WalMart passed by.
       
      Buying new Ford in Llano, TX is not as convenient as it used to be, but that’s the new reality after the financial melt down and the next closest rural Ford dealer probably no longer has as large of an inventory as it did in 2007/2008.

    • 0 avatar
      Dynamic88

      Nullo
      I agree with your prior comment, and with this one.
      Ford needs to reduce the dealer network for all the same reasons Chrysler and GM needed to.   It will be interesting to see how it works out – on the one hand, they don’t have bankruptcy so they might expect a lot of law suits and a lot of expense paying off dealers.   OTOH, they may not have Congress getting involved in their decisions, so they may actually be able to reduce their dealer network.
      The new car dealer network -for all makes- is much smaller now than in 1949.    Not just smaller per capita, but smaller in total numbers.   In ’49 there were more than twice as many dealers as there are today.  Yet there were not twice as many cars sold.     The reality for the past 60 years has been that more cars are sold through fewer dealers.
      There are fewer grocery stores now than in the past.  More people, eating more food, but fewer stores.   Used to be a little Mom and Pop grocery on every corner, just about.  Except the corners where there were gas stations.   And speaking of gas stations, there are fewer of those now than in the past.   Thousands fewer.   Yet more people are using more gas.   Fewer hardware stores as well, but I digress.
      Turning to pricing, you are right – it’s the fault of the manufacturers and dealers.   When I sold cars in the ’80s maybe 20-25% of customers had done any homework.   Even then  the margins were not tremendous -though probably better than today.    Where margins are low,  you have to have volume.
      And, as you say, it costs Ford (and the others) more to service and stock all these dealers.   Distribution will be easier and cheaper.

    • 0 avatar
      colin42

      Why don’t car companies (or large dealers) have virtual showroom? Like Amazon of car buying, supported with local service dealerships. customers could drive demo models at the service dealership and the cars could be built to order (it works for dell!) and delivered directly to the customer

  • avatar
    folkdancer

    Toyota has been smart in their dealer strategy.

    Think demographics. Ford, GM, and Chrysler have been establishing dealers for 100 years. Toyota only 40 years in the U.S. Our population has been shifting. Many midwestern cities and small towns are dying, then the sun belt went wild with growth, but now cites like Phoenix, which was based on just building homes, is shrinking. New comers have the advantage as to where to put their stores.


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