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Stacy94PGT · 09-19-2006, 05:56

Eliminating the Excess
Ford sets out to slash 600 dealerships

By DONNA HARRIS | AMY WILSON | AUTOMOTIVE NEWS

AutoWeek

Ford Motor Co. wants to eliminate as many as 600 Ford, Lincoln and Mercury dealerships over three years through its store consolidation plan, sources close to the plan say.

Ford is quietly offering some dealers as much as $300,000 in financial aid to encourage dealership mergers and streamline its bloated retail network, dealers say.

On Jan. 1, Ford Motor had 4,396 U.S. dealerships, according to Automotive News' annual dealer census. Two sources familiar with the plan told Automotive News that the company seeks to trim its retail network by about 600 stores, largely by persuading weaker dealers in some metropolitan markets to sell out to stronger ones.

Dealers say Ford is offering cash selectively to some dealers in 18 large metropolitan markets, primarily in the Northeast and Midwest. But they say the $100,000 to $300,000 Ford is offering is not enough to compensate for their investments in their franchises, such as dealership upgrades.

Nor would those amounts compensate for the distressed price another Ford dealer likely would pay for their franchises, dealers say.

'Chicken feed'

"It's chicken feed," says a Lincoln-Mercury dealer who asked not to be named. "Ford doesn't appear serious."

As Ford told of big cuts on Friday, Sept. 15, in jobs and operating costs, Cisco Codina, the company's group vice president of North American marketing, sales and service, briefed dealers about the consolidation plan during a teleconference.

But Codina did not speak of a formal dealer aid package, nor did he offer new details of the company's plan to "right-size" its dealership network. Codina could not be reached for comment later Friday.

"I know this is a sensitive issue," Codina told dealers during the broadcast. "And it's primarily a metro dealer issue, not so much single-point and smaller points."

Ford has prepared a war chest to help promote dealership closures, an inside source says. The aid is likely to be tailored to the circumstances of each region and each proposed deal. In addition to cash incentives, Ford also seeks to speed up deals by providing money to buy back vehicle and parts inventories, sources say.

Voluntary effort

Codina told the dealers that Ford wants to pursue consolidation "on a voluntary basis."

"We understand what's at stake here, and I have no interest in having an adversarial relationship with any of you," he said.

The Ford national dealer council will meet the week of Oct. 2 in Dearborn, Mich. Council Chairman Tom Addis, dealer principal of Lake City Ford in Coeur d'Alene, Idaho, says he expects Ford to disclose more details of the consolidation plan then.

The October meeting replaces an August meeting that Ford canceled abruptly after Automotive News first reported Ford's plan for dealership consolidations in 18 U.S. markets. The consolidation markets include New York, Los Angeles, Chicago, San Francisco, Detroit, Boston, Philadelphia and Pittsburgh.

Despite the massive personnel cutbacks that Ford revealed Friday, Codina told dealers that "you can expect a very high level of service -- we will be available to you." Codina also insisted that Ford would "stay focused on our business."

But dealers counter that Ford's employees are too busy worrying about their jobs to concentrate on dealers' needs. Says a Ford dealer: "There's a lot of fear behind the cubicles."

Erin Robinson contributed to this report