Texas court rules in favor of dealers

Ford Motor Co.'s used vehicle web site, www.fordpreowned.com was found to be in violation of the Texas Motor Vehicle Commission Code earlier this week by the U.S. Court of Appeals.

The web site allows consumers to shop for pre-owned Ford vehicles. Once the consumer finds a desirable vehicle, the vehicle is then shipped to a local dealer for the consumer to test drive.

The web site operates in Houston, Texas; Atlanta, Georgia; Boston, Massachusetts; Newark, New Jersey; Washington D.C. and New York City.

According to Gary Woods, owner of Brasada Ford Ltd in Houston, TX, says he is not surprised by the ruling. "We have very pro-dealer state laws here in Texas," he explains. Although, he is not sure the decision was the correct one.

"The violation is technical in nature," he explains. "It has to do way the way Ford advertised and delivered the vehicles. Essentially, Ford was using the dealer as a delivery facilator." The result is, "Dealers are prohibited from making a profit on the vehicle."

The dealers do not receive the vehicle's title until the first payment is made or financing is obtained. If the car is not sold, Ford maintains control of the title. And this is where Ford is in violation of state law, according the courts. Texas law stipulates ony dealers can engage in vehicle sales - the manufacturers are prohibited from doing so.

Mr. Woods believes part of the problem is that Ford does not always communicate with its dealers when designing programs like the pre-owned web site. "I think Ford should more closely with its dealers - it would help us to avoid some of these issues."

understands the situation Ford is in, however. "They have a lot of program vehicles to get rid of, and they've had trouble finding a smooth process for doing that. A while ago, they were shipping vehicles to the dealer as consignment vehicles and that didn't work. Now they are selling them to the auctions. And that may be the best method for them."