600 FORD MOTOR COMPANY (R) DEALERSHIPS TARGETED WITH "CHICKEN FEED"

The retail face of Ford Motor Company's paltry 14-15% market share target is slashing the number of retail outlets by 600, according to the Automotive News. www.autonews.com

FoMoCo's current "voluntary" consolidation plan apparently is a repackaged version of the "18 metropolitan market" reduction scheme first uncovered by the Automotive News on August 18, 2006. See http://speedzzter.blogspot.com/2006/08/ford-motor-company-pruning-of-dealers.html

This go-round will feature a $100,000-300,000 payment to the unwelcome surplus dealers. Or only about double of some of the reported worker buy-out payments.

That's "chump change." Or as one unnamed dealer put it in the Automotive News story, "It's chicken feed . . . Ford doesn't appear serious."

Given the huge investments required of FoMoCo's domestic brand dealers (even less than successful ones) in the large urban markets where FoMoCo believes it's overrepresented and the low-ball price offers expected from the "chosen" surviving dealers for the exclusive sales rights of the targeted dealers, a $300,000 make-up payment seems naive, if not insulting.

FoMoCo hatchet man Cisco Codina had the unenviable task of selling this leaden plan last Friday in a conference call to dealers. And he also had to assuage dealer fears about the FoMoCo corporate retrenchment: "you can expect a very high level of service -- we will be available to you."

The best reaction, however, to Codina's counterintuitive spin reportedly came from another unnamed FoMoCo dealer in the Automotive News report -- "There's a lot of fear behind the cubicles."

Indeed.

But there ought to be a lot MORE fear on main street in the targeted markets.

As Speedzzter suggested when the first version of this plan was announced, "Consumers and enthusiasts ought to think of it as giving the surviving dealers a license to steal." http://speedzzter.blogspot.com/2006/08/ford-motor-company-pruning-of-dealers.html

Imagine how uncompetitive your local FoMoCo dealer will be if he is the "exclusive" or nearly "exclusive" source in a market for FoMoCo's occasional "hot" model, such as the Shelby GT500. Even at the current numbers of dealerships, there is precious little price competition among Ford dealers on "non-commodity" models. FoMoCo adds to this problem by restricting supplies of performance cars in order to "keep margins high."

FoMoCo's anti-competitive actions also do virtually nothing to improve customer service. Will the contraction plan require the survivors to increase the number of service technicians and service bays to make up for those lost by the closing stores? Will they severely restrict service department backlogs? Will the survivors carry additional parts inventory? Given the justification for reducing competition is to increase store profitability, such increases in service are unlikely.

Ford's anti-competitive actions also signal that Ford is basically giving up on recapturing market share anytime soon. Fewer outlets equals less "shelf space" in the community and a reduced presence in the eyes and minds of potential buyers. If Ford sales were to turn around, the reduced dealer corps might be heavily taxed to keep up. And such increased demand would invarably lead to more of the dreaded "added dealer markup" on popular models.

Ford's anti-competitive actions also benefit surviving dealers who "gild the lily" with useless, overpriced dealer-installed crap. Some dealers can't resist gimmicks like paint sealers, pinstripes, and upholstry sealers. Others seem to think they are extensions of FoMoCo design by caking on hideous bolt-ons, such as brass-plated trim, plated fender extensions and "Conestoga-styled" vinyl tops. Giving such greedy jerks wider exclusive territories materially harms consumer choice. It also means that when such jerks run off prospective "ups" with their heavy-handed techniques and boorish service, consumers and enthusiasts will be more likely to switch to other brands rather than seek out an inconvenient competitor.

Fewer dealers also means Ford will get less feedback on product. Volume mega-dealers may not be as focused on chasing new market niches as smaller dealers who are closer to their customers and hungry for growth. Fewer voices will also be easier for the Glass House Gang to ignore.

Fewer dealers also means that the jilted ones will take their stores, their staffs and their experience to other brands. Undoubtedly, the "losers" will then have a thirst for "beating" Ford and the "inside" knowledge to do the most damage. Although the harmful and anti-competitive trend toward consolidation of dealerships in the hands of a few huge dealer "groups" may have reduced this risk somewhat, most likely it will be the remaining "independent" dealers who bear the brunt of FoMoCo's forced consolidations.

FoMoCo's sales problem ought to be fixed by increasing consumer access to the models and optional equipment that are in demand and creating more "in demand" models, not by anti-competitive measures.

Given modern "just in time" computerized inventory technology, Ford customers ought to be able to order new cars equipped exactly as desired in an abbreviated time frame for a competitive price (just try to special order anything now and see how unhelpful dealers groomed on "if you can see it, sell it" can be).

Detailed dealer inventory ought to be easily searchable for free by consumers on the internet in a national database that can accomodate searches for specific options, and any dealer ought to be able to retail any new vehicle in any FoMoCo dealer's inventory merely by paying FoMoCo for it plus the floorplan costs and a small transaction fee to the holding dealer (and such costs should not be subject to negotiation among the dealers).

A European-style "factory delivery" program ought to be aggressively promoted as well--such a program can protect dealers by requiring the purchase transaction to be through an authorized dealership.

And while FoMoCo needs to enforce strong minimum standards for customer service, Ford ought to allow dealers competitive flexiblity for innovations, such as satellite lots, diversity in locations, untraditional distribution channels, smaller and more diverse facilities, and additional freedom in fixtures, signage and "brand image" materials. Part of the reason some FoMoCo dealers lose money is that they are being forced by "factory standards" into unnecessary investment in a bloated, expensive and obsolete business practice model. Fewer dealers will produce no benefits for FoMoCo's "ultimate" customers and will likely yield great harm to enthusiasts. Cutting outlets is a "Bold Move" destined to hurt, not help Ford's loyal customer base.