Will it be worth it to dealers if Ford Motor Co. cuts back on its Blue Oval certification payments as proposed?
That's what some dealers are asking in light of Ford Division President Steve Lyons announcing plans to reduce the reward payments for complying dealers.
Ford's initial proposal would reduce the current payment of 1.25% of the sticker price for each vehicle sold to 0.5% in 2005. Now Ford wants to keep the program as is until that year, then scrap the payments altogether.
Will it be worth the trouble for dealers to be certified? asks Michael Kennedy, the incoming Ford Dealer Council chairman, who is not unsympathetic to Ford's situation.
“I'm a little closer to the situation than most dealers,” says Kennedy. “I know a healthy manufacturer is necessary for dealers to be successful. So if it's absolutely necessary that they cut the program, I'll have to live with it.”
Ford's problem is balancing the needs of its dealers with the needs of the financially strapped company trying to trim $1 billion in expenses.
Blue Oval grew much faster than Ford anticipated. Today, 95% of all Ford dealers are certified. Ford pays out $700 million a year for the program. With its current financial situation, it may be too much.
Jayne Mann, the incoming Ford Select Dealer Council chairwoman, says, “It will be unfortunate to see a change in the program. Ford is trying to be fair and equitable to all of its dealers. We would be remiss if dealers ignored the fact that we are business partners.”
Although Carter Myers, the National Automobile Dealers Association chairman, is dismayed by the proposed changes, he is encouraged that Ford did not make a concrete decision without seeking dealer input.
“I'm just hopeful Ford will continue to listen to its dealers,” says Myers.
Ford executives believe the program in its current form could end up as a dealer-relations disaster. Currently, dealers have to increase their customer satisfaction by two percentage points a year.
At that rate, only 45% of Ford dealers would qualify for certification in 2006, according to Ford's internal projections. So one potential scenario has Ford easing back on the certification requirements — along with the payments.
As of press time in mid-December, Ford Motor Co. had yet to announce a final decision but is expected to do so by the end of the year.
Meanwhile, dealers continue to bombard Ford with letters, emails and phone calls weighing in on the changes Ford proposed in mid-November.
“The ball certainly is in Ford's court. The sooner Ford announces a decision, the better. Dealers need to know where they stand. The waiting is bad for dealer-manufacturer relations,” says Kennedy.