Ford to Consolidate Dealer Network
The thinning of its dealer ranks will be accomplished primarily through consolidation, a Ford spokesman says.
Ford Motor Co. confirms it is seeking to reduce the number of dealerships in its U.S. network due to requests from its dealers, a spokesman says.
“At our dealer intro show meeting earlier this month in Vegas, we outlined for dealers what steps we were going to be taking to improve dealer profitability,” the spokesman tells Ward’s. “That’s their No.1 concern and we’ve made it our No.1 priority.”
The spokesman declines to say which regions will be affected, but published reports say plans call for closings in 18 urban and metropolitan markets, including Boston, Chicago, New York, and Los Angeles.
The spokesman says in major metro areas the closer the stores, the more they compete against each other for the same customer, rather than against the Japanese, Korean, General Motors Corp. and Chrysler Group stores.
Ford currently has about 4,300 Ford, Lincoln and Mercury dealers nationwide.
The thinning of its dealer ranks will be accomplished primarily through consolidation, the spokesman says.
“Ford will think long and hard about the placement of dealerships and encourage dealers to acquire and consolidate with other stores in their area,” he says, adding any steps will be completely voluntary.
Buyouts of dealerships are unlikely, given the costs involved, analysts say.
“Buyouts get expensive. Ford might encourage some to close by offering money, but they’ll probably let attrition take hold, as well as (let) more dealers realize they aren’t making money on lower sales volume and give up the ghost and bail out,” says Joe Phillippi, principal of AutoTrends, a marketing research firm.
The move comes as Ford’s North American sales and market share continue to slide.
“Following World War II, the idea was to have lots of dealers on every corner to drive sales and market share and that worked for a long time,” the spokesman says. “But we’re in an era of change.”
Reducing the dealer body is to be expected, Phillippi says. “If you want your dealer body healthy, and a lot of dealers aren’t making money today, it has to shrink if you want them to have the revenue and income to allow them to invest in the business.
“It’s not that the dealers don’t want to invest in the business, but some no longer generate the volume needed to cover the overhead because they are competing against another dealer only a few miles away for the same customer,” Phillippi says.
– with Jim Mateja
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