Ford: Dealer "Consolidation" Not Cuts

by Edward Niedermeyer

May 16th, 2009 6:10 AM

Ford is basking in its “last man standing” status this week as it holds its annual shareholder meeting. Automotive News [sub] reports that Ford expects to break even or turn a profit by 2011 without the help of government bridge loans. So confident are stockholders in the success of Ford’s current strategy that they have voted down reforms that would wrest voting control from Ford family preferred stockholders for the fifth time in as many years. This despite a $14.7 billion loss last year, and a $1.43 billion loss in Q1 of 2009. The good news? Ford has restructured its debt, reached a deal with the UAW’s VEBA fund, raised $1.6 billion in its recent stock offering, and its retail market share has “stabilized.” But there’s still plenty of work to be done.

The Freep reports that Ford is still concerned about the size of its dealer network. Not enough to spur the deep cuts that GM and Chrysler are undertaking but enough to motivate executives to call for the “consolidation” of some of its urban dealers. “The only issue we have is we have a few extra dealers in the large metropolitan areas,” Ford’s Alan Mulally told shareholders. “And so that’s where we are consolidating.”

But Ford’s 3,723-strong army of dealers apparently strikes at least one stockholder as somewhat excessive. The unnamed investor questioned Ford’s “case-by-case” consolidation strategy, noting that Toyota has fewer than 1,500 dealers in the United States. Luckily, the Rev. Jesse Jackson was on hand to provide the politically correct justification for not slimming down: Ford has been a leader with minority dealer programs. “Now, in the crunch, there is an attempt to retreat from inclusion,” said Jackson. “There must not be a retreat.”

Not that Jackson stayed completely on-message as a Ford attack dog. “The Ford Fusion, made in Mexico, can be made in America,” he told the meeting. “The automotive industry is the heart of our manufacturing. It’s the backbone of our financial markets.”

And Jackson wasn’t the only one grousing. “At last year’s meeting, talk was of profitability in 2009. Now, there is talk of profitability in 2011,” says stockholder William Thrower. Thrower introduced a measure to limit executive compensation and bonuses, arguing that “as stockholders, we must insist that all available capital be used for . . . restructuring.”

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2 of 23 comments

CPTG on May 17, 2009

MikieDee: Your question is precisely why I haven't purchased a new car from ANYBODY. All car companies share common vendors---CRYCO, GM, FORD, BMW, TOYOTA and HONDA use the same Windshield/glass suppliers, the same tyre manufactures, the same Battery Manufactures, the same computer chip and electrical manufactures. If I were Al Queda, I wouldn't fight the Americans in Afghanistan---I would take out full page ads attacking CRYCO's build quality, CRYCO's not honouring California Lemon Laws, CRYCO's depreaciation value (etc. etc) and simply erode consumer confidence in buying CRYCO products. CRYCO would go under and 'trainwreck' the American Economy as vendor after vendor goes under. Correct me if I am wrong, but all cars built in America use the same Fuse breaker vendors (there are three?) so if Cryco stiff's the vendors on payment and they goes under---EVERYTHING SHUTS DOWN!!!

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MPad1 on Jun 01, 2009

I actually think that Ford has a great opportunity to expand its dealer network by bringing in the best of the discontinued Chrysler and GM dealers. I laid out my reasoning in a blog post I added to Ford, Star Trek, and Domus. The potentially added downward price pressure caused by increasing the number of dealers would be greatly offset by the stated benefits.

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