US:Ford to reduce showrooms - Ford Forums

Stacy94PGT · 10-09-2006, 06:04

Ford to reduce showrooms
Dealerships in urban markets targeted

BY SARAH A. WEBSTER
DETROIT FREE PRESS BUSINESS WRITER

Too many dealers

Ford Motor Co. has more dealers than it needs, even though it has cut the number of outlets during the last decade for its traditional brands: Ford (down 10.6%), Lincoln (down 16.4%) and Mercury (down 25.5%).
Brands Outlets Change over 10years
Buick 2,757 -88
Cadillac 1,482 -93
Chevrolet 4,111 -309
Chrysler 2,878 -71
Dodge 2,871 -40
Ford 3,777 -447
GMC 2,234 -217
Honda 1,015 20
Hyundai 695 212
Isuzu 294 -290
Jeep 2,792 578
Kia 638 503
Lexus 215 43
Lincoln 1,361 -267
Mazda 709 -196
Mercedes-Benz 337 -9
Mercury 1,968 -674
Nissan 1,071 -19
Pontiac 2,781 -94
Saturn 438 89
Toyota 1,215 25
Sources: Power Information Network, Automotive News Market Data Books
Detroit Free Press

Ford Motor Co. met with its dealer council this week in Dearborn to share both new products and its plan to reduce dealerships in 18 mostly urban markets.

Some of Ford's 4,300 dealers -- which includes Lincoln Mercury outlets -- had said the program to cut dealerships would not work unless Ford changed its position on not paying franchise owners to close their stores.

Ford now seems amenable to financially supporting the consolidation, which is crucial for the success of its restructuring. Ford is bringing about a revamped turnaround plan after posting a $4-billion loss through the first half of the year in the division that includes the United States, Canada and Mexico.

"We will have to work with dealers," Al Giombetti, an executive vice president of Ford and president of Lincoln Mercury, told the Free Press in a recent interview.

He also said the plan will not be driven by a target number of dealerships that Ford would like to close, but on an analysis of each market area and what makes sense.

"It's more of a business case," he said, adding that Ford has no preconceived notions on which showrooms it wants to close.

"There is no hit list," he said.

A Ford insider further explained the automaker's retail reduction plan, saying that Ford wants groups of two or three dealerships to voluntarily join together to buy out noncompetitive dealerships in their market. Ford is willing to provide financial assistance to those groups to make the consolidation happen.

Most dealers and industry experts agree the company has too many showrooms, given its declining sales over the years. As the company's market share fell from 26.3% in 1996 to 17.9% today, the number of vehicles sold per dealership has been declining, and profits have been eroding. That has left some dealers struggling to make ends meet, attract qualified employees and invest in their operations.

Still, several franchise owners previously told the Free Press they don't think the project will work unless Ford agrees to pay the business owners to walk away.

Cutting the number of dealerships is already a complicated, political minefield. Automakers typically have difficulty persuading dealers to voluntarily close their stores, which provide robust profits to franchise owners in good years. What's more, many franchises have been owned by families over many years, and numerous family members often have to agree to closing down the store.

Ford is not the only automaker struggling to close showrooms. General Motors Corp. is trying to consolidate Buick, Pontiac and GMC franchises, and the Chrysler Group has been carrying out its Alpha Project, which combines Chrysler, Dodge and Jeep stores under one roof, for years.

All three automakers are saddled with a large retail network that was built up during years when they dominated the U.S. auto market and population was concentrated in urban areas rather than the suburbs. The automakers would prefer to locate franchise dealerships where they are most needed, eliminating those in areas where selling new cars and trucks is difficult.

Reshaping the retail footprint for the changing market, however, could be critical to the company's future.