Publisher & Editor Mike Roscoe conducted this interview with a prominent and highly successful Ford dealer on the condition of complete and total anonymity. Send any response to: mroscoe@dealeronline.com or fax at (931) 388-4881.
What is your opinion of Ford's attempts to get into the retail end of the automobile business?
I disagree with it entirely. They seem to think that they can do it better than the distribution system that they have now. I don't think that they can. The proof in the pudding is the fact that their Auto Collections have been complete failures. Not only did they lose money, they were supposed to save 20-30% in distribution costs. They proved they can't do that either, probably because of all the bureaucracy that's involved in running it through a big corporation. Plus they lost an enormous amount of market share. What really bothers me is, even when the factory screws up on such a grand scale, they will never admit their mistake. Some heads should roll because this is the wrong approach; call it whatever they want to, "laboratory tests" or "experiment".
What is the real motivation for Ford getting into this end of the business?
I honestly don't know, Mike.
What do you think it is?
They may think that they can pick up extra profit in doing this by taking over the distribution system. My concern is, while they're trying to do it, even though I don't think they're going to be successful, as they've proven with Auto Collections, they can wreck havoc with the distribution system of the franchisees. They can really do a lot of harm, not only to the franchisees, but to themselves. The other side of the coin is, if they happen to start to succeed at it and create these monopolies, then the public is going to suffer. I think what's happened is, with some of these boards of directors, they get a guy on there, let's say somebody from GE, who did away with their distribution system many years ago. First they took the service business away from their dealers. Today, if you call GE to get a washing machine fixed, in our area you pay $85 for the fella just to show up at your house. If Ford were able to win with their Auto Collections, that same kind of thing would happen. Prices would go up. If those were still franchised GE dealers, they could never charge $85 just to have somebody go to a house, competition would not allow that to happen. If Ford were really able to take over this business, or any manufacturer for that matter, prices would rise. The public would suffer from it because the manufacturers would be creating monopolies and they would control the whole process.
But really, what do you care what Ford does in Tulsa or Salt Lake City or Rochester?
Because if they are successful in those marketsthey haven't been fortunatelybut if they are successful, they'd pursue it on a broader basis. Think about how General Motors has approached it. They started by saying they're going to hit 130 markets. Can you imagine if they controlled 130 markets? At first Ford said it was a "laboratory test" and they were going to try it in small numbers. Then they came out and said they were going to do it in much bigger numbers. When dealers started to get upset about that, Ford kind of backed off on it, but that was still what they were going to pursue. I have no doubt about it. Then they failed. Now they're pulling their horns in, but they don't even want to admit to that.
Let's not forget, this all started in Indianapolis.
Right. You know another thing, Mike, I could never understand is why they went into a partnership with Auto Nation in Rochester, New York.
What do you think of that?
I can't understand why they'd do that. One of their supposed reasons for starting this Auto Collection fiasco was that they were concerned about the consolidators. Now all of a sudden
They're in bed with them.
What hypocrisy that is. But the truth of the matter is, that is a total failure also. Not only are they losing money, but they're also losing market share.
What is it that predicated Ford getting into retailing?
We've been trying to tell them for 30 years that they have too many dealers, which they do.
The truth of the matter is, the whole philosophy years ago with Ford was, you never shut down a dealership, even if it closed down due to attrition. You reopened it, no matter what. Because the philosophy was that all you had to do was put in another dealership or two and you'd keep up the sales. But recently they came around to realizing that that wasn't true. I think part of it has probably been the foreign manufacturers. Take Toyota or Honda, who do tremendous volumes with far fewer dealers. Ford has gotten to the point where they can see volume can be done that way, so they realized that they were over-dealered. But they're approaching the problem from the wrong angle.
So what should they do?
What they really should be doing is backing off getting into retail, let a few heads roll of the people who created this monster and get back to trying to do business through the franchise system, which is really their most efficient way of doing it. All this talk of 20-30% savings in distribution is a lot of hogwash and what they should come around to thinking is they've got to find a way to do solve their problem through the franchise system, through attrition, through buyouts, through combinations of dealers and they should be in the marketplace spending some money doing that rather than wasting hundreds of millions of dollars making fools of themselves.
Don't you think the fact that the way that Ford has gone about their Auto Collections, the way GM has gone about their buyout, the factories are openly admitting that they don't care about their dealers? Don't you think that the gauntlet has been thrown down and they're going to do whatever they can to get these dealers out of the way? And what about their approaches to the internet?
It certainly seems that way, Mike. I can't disagree with that premise. The trouble is, I don't know how far down the road they've thought. Let's assume that what they're really trying to do is control that internet through their own pricing, as in the "experiment" that Ford is trying to do in Arizona where they are taking the average of all the dealer's financial statements, which is a ridiculous way to do it because there are people who are losing money doing this and they get thrown into the equation. E-price they're calling it. But let's assume that they are successful in doing that. Now who's going to take care of that customer once that customer buys it on the internet? If that customer doesn't buy it from me, for instance, and wants to come to me for service, I'm obligated to service them. But let's talk about the real world. Who am I going to take care of first? Am I going to take care of the customer who came into my place who bought it directly from me or am I going to take care of some internet customer who comes in and says he wants service? I won't refuse him the service, but where is he going to go? Is he going to go to the bottom of the list? Is he going to be a happy customer because he can't get the same kind of service as the guy who bought the car from me? That's the real world, Mike, and that's what's really going to happen.
How has this affected Ford dealers?
A lot more dealers are now looking to buy other franchises, more are now dueling franchises in their Ford stores. We've put on the back burner a renovation of our facility that we've been thinking about for a long time and we're starting to look at other franchises instead because, long-term, it doesn't look like a good investment. That's what's happening already. In the long-term you think about how that's going to affect Ford's market share relative to Toyota and Honda, and the other manufacturers. It's going to hurt them.
What, if anything, can an individual dealer do in the face of this attack on the franchise system?
It's very difficult, especially for an individual dealer, to do anything because the factories hold such economic leverage over us. In your last "Dealer Undercover" article with the GM dealer, he and I agree wholeheartedly that you have to try to do something to control it legislatively. In this state we have been working very hard to do that. We've probably done a better job than most states. Some states don't seem to have gotten excited about it. They're going to suffer the most, those states that don't step up to it and do something about it. They're going to have their franchises destroyed as far as I'm concerned.
The factories are going to go after the weakest link in the chain, get a foothold there and use that as a springboard to everywhere else.
Absolutely. It's critical that every single state association immediately gets up to speed.
Frankly, we've contended for years that NADA hasn't stepped up to the job that we think they should be doing on a national basis. They always contend that they can't get anything done on a national basis. They haven't tried to promote fighting this attack legislatively as vigorously as I think they should have on a state-by-state basis. They could have done a heck of a lot more in supporting states and promoting the importance of fighting this fight. Now they say they're going to, but that remains to be seen.
But the state ATAE's just can't wait to see what NADA is going to do.
Exactly. Frankly, I think NADA gets into bed with the manufacturers too often. I think NADA has to keep a "hands off" policy between NADA and the manufacturer. NADA shouldn't have any manufacturer contributing anything. In too many instances they get beholden to the manufacturer. I know a lot of dealers who are disappointed that NADA isn't taking on the dealers' interest as directly as they should and too many times NADA spends their money trying to work the legislatures for the manufacturer's benefit. For instance, environmental issues - that's the manufacturer's job to lobby for environmental issues. NADA money shouldn't have been spent on that - NADA should solely be a dealer advocate organization and they're not.
My goal is for DEALER magazine to help fill in the gaps between what NADA can and cannot do or is able or unable to do.
We sure can use the help.