Ford Dealership Cull. It Ain't Over Yet.

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.

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.

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.