The rationale behind the Ford Retail Network (the consolidation of dealerships within certain metropolitan areas, later re-christened Auto Collections) never was too easy to understand. Ford tried several explanations, but no single one seemed sufficient to justify incurring the bitter opposition from its dealers that followed. By Bert Wyatt
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The professed aims – reduction of costs and competition within given metropolitan areas – could surely have been achieved without such direct participation and unsought interference by Ford. As for the intention to “achieve a common sales culture”, well, hadn’t car manufacturers been trying to do that for the past 100 years?
And then there was the disingenuous attitude towards mega-retailers. Only a few years before, we were told “a really well-run privately capitalised dealership has an advantage over these big mass retailers”. In fact, the sudden rise of the mass retailers was itself being offered as one reason for Auto Collection – “we have no intention of letting a third party dictate terms to our dealer body and ourselves”. Now here it was inviting the greatest of them all – AutoNation – into partnership in one of its first Auto Collections, at Rochester, NY!
In any case, although this radical re-grouping would certainly eliminate competition between members of any newly-formed local group, it would do nothing to prevent competition from other manufacturers’ dealerships, nor even other Ford dealers on the periphery. No, the whole Ford dealership body, and indeed the industry at large, read this as one more incursion by a carmaker into the retail world, just another example of “mother knows best”.
Dealers, anxious to gauge the extent of the encroachment, were met with an unhelpfully reticent “we will examine each situation and do it where it makes sense”, only serving to inflame an already tense situation. The inclusion of Oklahoma City, certainly no “metropolitan area”, caused particular anger.
We now know, of course, that the original plan was for 100 or so areas to be “re-marketed”, with similar programmes already arranged in markets all over the world – Europe, Australasia, Canada and South America. Viewed in this light, Auto Collection merely succeeded in evoking the hostile resentment of the whole franchise, and relations between factory and dealership soon sank to an all-time low, as the annual J D Power survey illustrated.
“The protestation that ‘there is absolutely no truth in the rumour that Auto Collection is to be unwound’ had barely reached the media before the first crack appeared in the Ford façade” |
Between July 1998 and March 1999, Ford hastily formed groups in Tulsa, Salt Lake City, Oklahoma and Rochester, showing no sign of even listening to the mounting opposition from both dealers and state regulators. But the reckoning, when it did come, arose from within. Tulsa Auto Collection was in trouble after only a few short months of operation. Market share plummeted, sales staff jumped ship, and parts and vehicle ordering systems descended into chaos. Ford was forced to buy out four discontented dealers and to chuck another $50 million into the black hole.
Salt Lake City, too, soon came apart at the seams. Light truck sales were down 29%, cars by 13%, and a majority of the dealer participants were seeing their investment vitiated by a collapse in profitability. Once more Ford had to step in and buy them out.
The protestation that “there is absolutely no truth in the rumour that Auto Collection is to be unwound” had barely reached the media before the first crack appeared in the Ford façade. The statement “No further expansion of the experiment (note the change in terminology) is to be undertaken for the time being” was an indicator that all was not well.
They say pride comes before a fall and certainly pride held sway for a long time, but it can never be a substitute for profit. It took two more years for Ford to eventually cry “Uncle”. Contrasting with the blaze of publicity three years earlier, Ford recently quietly announced the dissolution of the whole enterprise, starting with the disposal of Auto Collection Tulsa, and confirming that the three remaining groups – at Salt Lake City, Oklahoma City and Rochester – are also on the block.
Not only is the investment being liquidated, but the whole concept of metropolitan marketing areas has been jettisoned. Although Tulsa has gone as an entity, the other three (comprising 23 separate dealerships) are to be broken up. So much for the benefits of consolidation. Clearly, no misguided marketing mantra is worth the cost of continuing losses.
Tulsa goes to the United Auto Group, with 123 dealerships one of the largest public groups in the nation. Ford offered this explanation of the decision to unload Tulsa: “Jim Evans (president of the Tulsa group) came to us with a buyout offer.” To fund the purchase, he turned to United, and settled for inclusion as a minority shareholder and continued full-time employment.
United is headed by long-time Ford friend Roger Penske, who was suitably circumspect in his on-the-record comments: “Ford had the right ideas with [Auto Collections] – the ability to consolidate a market, with centralised advertising, parts and vehicle distribution, and database.” Independent commentators were less unctuous. “In Ford’s hands, Auto Collections were almost worthless because they don’t know how to make money as a retailer,” was one remark.
Since Jac Nasser took the helm, Ford seems to have paid less heed to its dealers, so one can only assume that the “experiment” has been sufficiently disastrous for the top brass to eat humble pie, and leave retailing to the experts. After all, the company already has an in-tray full of serious embarrassments: the Explorer/Firestone tyre war (and several other recall issues), increased competition to its hitherto unrivalled leadership in light trucks, and an abysmal performance in Europe.
From time immemorial, Ford – and its chief rival, General Motors, too – has chipped away at the dealer structure, patronisingly claiming to know more about retailing automobiles than the individual dealer entrepreneur. They barge in with a variety of reasons and excuses, riding roughshod over their dealers’ interests. It takes but a short time for them to see that these owner/operators have the experience, the training, the loyalty and determination, to do the best job possible. When you have millions of your own dollars at risk, you just better have the expertise!
Announcing Ford’s decision to an assembly of dealers, Nasser said: “Ford has learnt a lesson about how tough it is to make it in the retail world, and how good a job dealers do.” Before anyone gets too excited about this belated revelation, perhaps we should recall that similar words have been uttered before. May dealers now be left to do what they do best? A suggestion: Engrave those words on every Ford briefcase, lest they forget.
