Ford Motor Co. put the final shovel of dirt on the automaker-as-dealer grave when it said it's selling its retail collections in Tulsa, Oklahoma City, Salt Lake City and Rochester, NY. This happened 18 months after General Motors Corp. scuttled its plans to buy and operate 800 dealerships.
Ford says it learned a lot from the experience and finally made the once-foundering businesses profitable, but paid too steep a price in terms of trust between itself and its dealer partners.
Says Ford Dealer Council Chairman Jerry Reynolds, “It says a lot for their dedication to dealer relations that they'd do this at this time. It would make a lot more sense for them to hang in there, sell some cars and recoup some revenue. That tells me a lot about their sincerity.”
Trust, in fact, was such a touchy subject during the past couple of years that Ford Div. President James O'Connor once cautioned a reporter from asking his then-boss, Robert Rewey, about the “T” word.
Yet, the trust issue was why GM dropped its plans to enter the retail fray and the main issue cited when Ford made its announcement.
“Would I had preferred (the collections) hadn't happened? Sure. But since they did, we did learn a lot.”
— Ford dealer Jerry Reynolds
“We have to acknowledge that we paid a heavy price for the auto collections in terms of trust with our dealers,” says Mr. O'Connor “The first thing Jerry Reynolds said when he came to the council was that this is a major disconnect. Divesting ourselves of this hopefully puts us on a positive journey to improving and getting that partnership back that we were used to in the past.”
When reminded that the dealers warned him about problems stemming from this idea when it was first announced, Mr. O'Connor says, “Well, that's true.”
Lincoln Merrihew, vice president of corporate planning at the Automotive Information Center, says Ford's decision likely had a lot more behind it than mending fences with dealers.
“Ford has had a bumpy road on a number of fronts,” says Mr. Merrihew. “With the Firestone tire thing, the new Explorer not selling as well as anticipated and its quality problems, there's a lot of pressure to focus on the core business. And since the dealers are the main link to the customers, Ford really needs its dealers to help mend the customer relationship.”
Auto Analyst James A. Mateyka says the Big Three are over-dealered in many places, “and I think everyone now agrees that this wasn't the best way to solve that situation.”
The collection experiment began in Indianapolis in 1997 when the company tried, rather heavy-handedly, to buy 21 dealerships in that market. The dealers were defensive. Ford changed its mind — and its game plan. The next year, it tried a kinder and gentler approach, seeking markets where dealers were willing to sell.
“Large public corporations (such as AutoNation Inc.) were getting involved, there was a lot of talk about the Internet, so we thought that maybe there were some things we could try to model if we had more control over a particular market,” says Mr. O'Connor explaining his company's rationale for assembling the collections.
GM cited similar reasons for attempting its own program of retail outlet ownership, but pulled the plug a lot sooner than its rival. For all their faults, the auto collections gave Ford insight into retailing.
“Anything that we can do to better understand each other's business, you've got to look at it in a positive light,” says Mr. Reynolds, owner of Prestige Ford in Garland, TX. “Would I had preferred (the collections) hadn't happened? Sure. But since they did, we did learn a lot. I look forward to getting more information on what they learned there. I think it'll be very helpful to the Ford dealers.”
Barry Merrill, director of Ford Investment Enterprises Corp., the company under which the collections operated, says the biggest impact of the collections has been on a number of Ford's own employees. Many of the company's highest-potential recent hires took a three-week training program called Camp Tulsa. There they waited on customers walking in the showroom and sold cars, just like any other salesman.
“These people came back transformed as a result of that,” says Mr. Merrill. “It gave them a renewed sense of understanding and appreciation for not only what it takes to sell a car, but also the motivating factors behind a customer — what moves them to buy not only a car, but a Ford product as well.”
This sort of program would have been impossible in a dealership owned by an entrepreneur, but will continue as part of the agreement with UAG, which is buying most of the Tulsa collection.
“This is very valuable for Ford,” says Mr. Mateyka. “These people will have been there, at least for a while, and have a better rapport with dealers.”
Perhaps more than anything else, the Ford auto collection experiment proved something that both Ford and GM dealers were saying all along — that no one sells vehicles better than franchised independent dealers.
“It really showed us how valuable and important our dealers are and the great job they do for us,” says Mr. O'Connor, a former general manager of a dealership. “I think that's certainly the number-one lesson, that the retail distribution network that we have in place is the finest in the business and that we shouldn't disrupt that.”
Mr. Reynolds says, “It's not quite as easy to run a big Ford store, or any Ford store for that matter, as it appears. I think that Ford realized that dealers do a great job on a day-to-day basis servicing their communities and moving cars.”
Says Mr. Mateyka, “In general, most manufacturers do not do as well managing a retail operation as retailers. Most manufacturer executives came up through the engineering, finance or manufacturing ranks. They rarely get someone with actual experience selling cars. They don't think like and they don't act like retailers.”
A city-by-city look at the Ford Auto Collections
Indianapolis: Ford attempts to buy 21 dealerships in 1997. Dealers refuse and the plan is dropped.
Tulsa: Tulsa Auto Collection launches in April of 1998. It involved eight dealers, six Ford stores, two Lincoln Mercury outlets, a Mazda and a Jaguar dealership. One Mazda dealer is the sole holdout. The collection will be sold to Jim Evans and UAG in 2001.
San Diego: San Diego Auto Collection launches in September of 1998. It involved two Lincoln Mercury dealerships. It was sold in 2000 to Ed Witt, its dealer operator.
Rochester: Rochester Auto Collection launches in December of 1998. It included all eight for stores in the market and one Lincoln Mercury point. AutoNation was a partner in the collection for a time, but was bought out by Ford in 2000. Will be sold to individual dealers in 2001.
Salt Lake City: The Utah Auto Collection launches in March of 1999. It involved 13 dealerships and 14 franchises including seven Ford, three Lincoln Mercury and four Mazda. One Salt Lake City dealer did not participate. Will be sold to individual dealers in 2001.
Oklahoma City: The Fred Jones Auto Collection launches in March of 1999. It involved 12 dealerships including seven Ford, two Lincoln Mercury and three Mazda. It was renamed the Oklahoma Auto Collection in 2000 and put under the management of the Tulsa Auto Collection.