Ford to shrink dealer network over three years
Reuters is reporting that Ford will be shrinking its dealer base over the next three years in order to better align its distribution network with a market share that is smaller than it has been in the past. Dealers were told of the planned reduction at the dealer meeting in Las Vegas last month. The East Coast and California have the highest saturation of Ford dealerships and are likely to see the largest reduction in numbers. At the moment there are about 4,300 Ford dealerships operating in the U.S.This is tough but smart call by Ford. It would be easy for Ford to use the belief that its market share will begin climbing again in the near future as an excuse to keep its dealer network intact. However, shrinking the dealer network now to more comfortably handle its reduced production capacity, it appears Ford is accepting its current situation and trying to build a smaller, more efficient Blue Oval.
[Source: Reuters]
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Reader Comments (Page 1 of 1)
Mal Fuller 7:45PM (9/11/2006)
It's true that in order for Ford to have a robust dealer network, the number of dealers in any given region has to be in proportion to their market penetration for the same region. However, a reduction in the number of dealers will have almost no immediate impact on Ford's profitability. It's still a good move if it is done fairly.
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Nick 7:45PM (9/11/2006)
Smart.....finally. This is part of their even larger initiative to realign their cost-structure with their current market share.
All anyone is asking of these companies is that they gain the ability to THINK. "Moving the metal" won't work anymore, and it shouldn't because it's wrong. I know that Ford is at the very least acknowledging that swift and decisive moves are required now. It's truely unfortunate that these companies have to have their backs against the wall before we see their best.
Hopefully, within a year or two, we're seeing a FoMoCo that consists of a profitable Ford, Lincoln, Mercury, and Volvo....less their current cash cows LR and Jag. I think most people know that Aston Martin is as good as gone. FoMoCo knows what needs to be done...they have no choice but to execute.....none.
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JJ 11:45PM (9/11/2006)
Yeah i think GM, Chrysler and Ford are all doing this, the problem is, sometimes established dealers dont want to just up and leave and give their stuff up to dealers that are bigger.
Because sometimes in the dealer network, its not the numbers ya pull in, its who ya know.
For instance the dealership i work for consistently sales more cars than the other dealerships in our area that are of the same brand (daimler chrysler) But one of the dealerships we outsell, the president is also the president of the local dealer association, so when chrysler came calling with who they wanted to close down, our dealership was on the chopping block, despite the fact that we sell 2-3x more cars than any other dealer in a 15 mile radius of us, but since our dealer principle only has one dealership, he's considered expendable i guess. I guess it also doesn't help we aren't an alpha store or nothing.
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Howard Kerr 9:17PM (9/11/2006)
Of the domestic brands, I'm quite partial to Ford and Mercury. That said, I think it's unfortunate that the company wasted time in the '80s and '90s trying out things like the "factory store" and "factory-owned" auto recycling and moving Lincoln to the West Coast...then back to Dearborn. The time AND money lost on those ill-conceived ideas means that dealers will now be left to take it in the shorts. Three years is perhaps too short a time to bring the dealer numbers into line with market share....five years would be more idea, but then, that doesn't fit into the "Way Forward" timeframe.
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All World Automotive 1:14PM (9/12/2006)
They shrunk their parts distributors in "92". Lost a lot of revenue and lost a household name Motorcraft. Now thy want to do the same to the dealers. Are they trying to go out of business?
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Richard Warren 8:47AM (9/12/2006)
And this helps Ford how? Ford does not own the dealerships, independent dealers do.
It certainly does not help the dealers that may be asked to close.
All it really does is reduce the number of dealers in a particular area and it's associated competition. Remember competition? It's how you get lower pricing.
Dealerships are personal, closing one may actually hurt the chances of moving the product. Some folks won't go to that "other dealership" Reducing the number of points simply makes the remaining points perhaps more profitable.
Depending on how you do this it may leave more rural areas uncovered.
As the light bulb flickers then goes off the slogan is "Ford we have no idea"
"Ford will be shrinking its dealer base over the next three years in order to better align its distribution network with a market share that is smaller than it has been in the past." Corporate bullshit.
Be a dealer, spend millons on facility, work hard, employee people, create cash flow through the community, sell the product. Uh, sorry, you're not a Ford dealer anymore.
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BG 8:31PM (9/12/2006)
Mr. Warren,
I think (and by no means know with certainty) that the reason ANY auto manufacturer might want to close dealers are the $$$$ associated with servicing those dealers.
I think Ford has come to the realization that most people who buy Ford products will ONLY buy Ford products and will not consider any other brand and therefore it doesn't matter if the dealer is 60 miles away (rural areas as an example where domestics pretty much rule anyway).
I have an uncle who works for Subaru of America and they pay him a pretty sum to visit each and every dealer in the Denver area on a consistent basis...there is a significant cost to having him do that and manage everything he does. He used to cover much more rural areas in WY, CO, NE, and SD. I'm sure these dealers had lower sales but probably a higher cost as it relates to Subaru servicing them.
Just my two cents
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brent 9:34AM (9/12/2006)
If you enter my town of Ambler, Pa at Ford.com you get 10 dealerships under 12 miles away. If you go to Toyota you get 3 dealerships. If you go to Honda you get 4 dealerships. Some of these older Ford dealerships don't have much selection in cars. The trend has been for the dealerships to be larger with more inventory. Ford can't ask a dealership to spend big bucks to upgrade their facility when there are so many Ford dealers around.
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Peter 9:38AM (9/12/2006)
Would Ford have to buy out the franchises of the dealerships it wants to close? Might get expensive.
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Ryan Gerardi 4:54PM (9/14/2006)
Good comments. Many auto makers are releasing "Crossover" vehicles, a style of which Ford lacks. I think this is affecting their market chare. Another factor could also be our shopping trends. Consumers, especially car buyers, like to buy from people they trust and we also like selection. Ford dealerships , like "brent" stated already, tend to be many and smaller relative to other franchises such as Honda, Toyota, and Chevrolet. This forces consumers to shop around more for a Ford dealer they trust and that has good selection whereas fewer dealerships with larger inventories have already won half the battle.
Check out the posting on my blog - http://blogproautomo.blogspot.com/2006/09/ford-to-shrink-us-dealer-base-over-3.html
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