Ford Says It's Leaving Dealership Consolidating to Dealers

NEW YORK — Ford Motor Co. top executives say they are taking a hands-off, consultative approach to reductions in dealership ranks.

The auto maker is offering advice to dealers but not issuing mandates to shutter stores, say CEO Alan Mulally and Mark Fields, president-the Americas, during a meeting with journalists at the New York International Auto Show.

“There is an overcapacity in our distribution network and the need to consolidate (dealerships), because it is important that they are profitable,” Mulally says. “You will see them continue to figure out how to consolidate (in a way) that makes sense for them and us.”

It's a matter of working together, the Ford chief says. He calls dealers dynamite business people. “But remember, even though we have a close working relationship with our dealers, they are independent. They are all trying to figure out the right thing to do.”

Mulally says Ford is “over-dealered” in several large metropolitan markets, where too many Ford dealers “are competing against each other, rather than against the competition.”

He sees dealers buying out other dealers as one of the best ways to consolidate retail operations. But the auto maker has no grand plan for eliminating dealerships, always a sensitive issue on the retail side of the business.

“We don't have a room in the basement of the world headquarters where we are planning numbers, but we do have discussions with dealers,” Fields says. “We're not going to force dealers to do anything. The facts will set you free. That's the starting point of discussions.”

Fields describes Ford's relations with its retailers as open, respectful and business-like.

“Relations with dealers always tend to be correlated to dealer profit,” he says. “Our dealers' profits are down. Dealers want more profitability. They want to see hit vehicles. There is an old saying that product is everything. A close second is a profitable distribution network.”

As a part of being profitable, says Mulally, dealers don't want “inventory shoved down their throats.” That happens when too many factories make too many vehicles that consumers won't buy without big incentives and deep discounts.

“Making cars people don't want and forcing them on (dealers) is a death spiral,” he says.

Overdealering can hurt dealers themselves because it fosters intense competition among same-brand retailers and often results in razor-thin profit margins if customers, during price negotiations, are playing one dealer off another.

But overdealering hurts auto makers too, says Fields, even though the wholesale invoice prices of vehicles are non-negotiable.

“Overdealering can trash your brand, hurt your residuals and make for unhappy customers,” says Fields. “When customers walk into a Ford dealership, they are in effect walking into Ford Motor Co. So we want it to be a great impression.”

Trimming the dealership ranks is part of a massive Ford restructuring that includes a one-third reduction of the workforce and widespread plant closings to stop production excesses.

Such slashing has caused “tremendous upheaval,” Mulally says, “but it is the right thing to do” for the future health of the company.

Fields says Ford wants to trim personnel ranks to get in fighting shape, but not overburden those who remain. “We don't want people dropping in the hallways,” he says.

Ford is spending a lot of time “to make sure engineers are working and not meeting,” says Derrick Kuzak, Ford's group vice president-global product development.

Despite the retrenchments, “this is an exhilarating time to be with Ford” for employees who remain, because the company has a strong future, Mulally says.