Quality, market share, leasing top Ford dealers' agenda
Beau Smith says Ford must work to regain the market share it has lost but adds: "Share is important, but it doesn't pay the bills. You can't take the share to the grocery store and buy groceries."
When Beau Smith was still in high school, he started working part-time at Sill-Terhar Motors in Broomfield, Colo. to earn pocket change.
"I worked to make enough money to go to the prom. I did the worst jobs. I cleaned the lot. I cleaned the parts shelves and took the oil gook out of the shop. I cut weeds."
When he went to Colorado Mesa State University, Smith majored in broadcasting and mass communications and became a star shooting guard for the Mavericks basketball team. He's still in the record books as the school's No. 9 all-time scorer.
After graduation and a marketing internship, Smith spent four years as assistant head basketball coach at Colorado Mesa. He was in charge of the team's offense, running a Princeton-style motion system. He returned to Sill-TerHar in 1999 and became a partner seven years ago. His partner is Jack TerHar, his uncle by marriage.
"In coaching or operating a dealership, you have to be relentless to be successful," he says. Smith believes Ford finally has the products to outperform the market this year, if dealers work hard to compete.
Smith is serving the first year of a two-year stint as chairman of the Ford National Dealer Council. He spoke with Staff Reporter Bradford Wernle about the outlook for Ford dealers in 2013.
How was 2012 for Ford dealers?
It will be one of the best years that we've ever had from a profitability standpoint.It was a good year, bordering on great. We saw showroom turnover. The F-150 with EcoBoost had a fantastic year.
What is Ford doing right?
I think it's the consistency of their approach. It can be a boring answer -- working on the four pillars: quality, green, safe and smart. At the top level, they really understand you need to get those things right to be successful. What they're doing right is staying focused on the plan. In the time I've been on the council, their collaboration is better than I've ever seen it.
In what areas would you like to see improvement?
I think Ford and all of the OEs need to continue to make sure that we're delivering the in-vehicle technology that customers want and that's easy to use. Ford is focusing on that, and it needs to continue. There's an opportunity for everyone in our industry there because the technology is in such high demand from customers, but that's a place where it can continue to get better and needs to.
Ford sent some software fixes for the MyFord Touch system in 2011 and again in 2012. Did they improve the process?
I think the process is a lot better from just a year ago. It's the first time we have done software updates with in-vehicle technology. We did a much better job delivering the upgrade in 2012 than we did in 2011. I expect they'll continue to get better in upgrading customer software.
Ford was 27th of 28 brands in the last Consumer Reports reliability survey. What does Ford need to do to move back up? How can dealers help?
What needs to happen is really listening to customers as far as what level of infotainment they want in their driving experience and execute that infotainment better than the competition.
You need to lead in technology, but you need to lead with your listening ears wide open to what consumers want.
Customers will always tell you they want everything, but when it gets right down to it, most customers want the technology that's simplest and easiest to use. You have to walk that line between giving them everything they think they want and giving them what they really need.
It's a fine line to walk, but when they get that right I think you'll see customer satisfaction scores increase.
You had three launches: Escape, C-Max and Fusion. How did Ford handle those challenges?
When you launch two all-new vehicles the size of Escape and Fusion in such big segments, there are challenges. They had to rework two plants and our capacity. There were some hiccups in the launch, but there were fixes. From a product standpoint, we have two fantastic products in the showroom. As far as the launches go, if you have to give it a grade, it's not an A plus, but probably a B.
Ford has had several recalls, including four for the Escape. How have those impacted the launch, and how well has Ford handled those?
I think Ford and the dealers have handled it as well as they could. On Escape particularly, it has not affected the launch. Our Escape sales are strong.
From the beginning the company and dealer council worked proactively to decide what to do to take care of customers. The key was their willingness to communicate with us. That didn't always happen in the past. The fact that Ken Czubay [vice president of U.S. marketing, sales and service] sat in our shoes at one point as a dealer really helped that.
The C-Max Hybrid is a new nameplate. How is it being received?
It is the brightest spot in our showroom. It is the biggest surprise of any launch I've been part of. We are seeing customers we have never seen. We're seeing Prius customers, Subaru customers, customers who never considered Ford before. Not only do they buy the car but they put their name on orders in transit.
There have been some concerns that some customers are not getting the gas mileage claimed on the EPA stickers for the C-Max and Fusion hybrids. What do you say to those customers?
It's an industry concern. We need to educate the consumer right from the beginning of the test drive on what driving habits you should use to get the posted mpg. Although it hasn't affected sales for those vehicles, our industry needs to look at what we're telling consumers and how we're educating them on estimated posted mpg.
Ford has diversified from being predominantly a maker of gas-guzzling trucks to offering a wider mix that includes some smaller, more fuel-efficient vehicles. How well have they handled that transition?
I think they've handled it well. The consistency of the message is more important than the urgency of the message. We are in the super segment [Focus-Escape-Fusion-Fiesta] with fuel economy, the utility segment with fuel economy and the full-sized F-150 with fuel economy. We know that fuel economy is critically important to customers. It's a focus of the company. I think you're going to see them continue to market EcoBoost as a good fuel-efficiency brand.
Competition is red hot in the full-sized pickup segment. Are you happy with Ford holding the line on incentives, or would you like to see more?
I'm pleased with the F-series sales pace. Any time you talk about a vehicle purchase in a segment like the F series, the quality of your vehicle and the perception of quality has to match the price. The sales results would tell you the incentive plan was pretty good in 2012. I know Ford will watch it closely to make sure customers see the value in our product.
What did you think of the Atlas Concept pickup Ford unveiled at the Detroit show?
I loved it. It just keeps us out in front of the competition. The truck team does such a phenomenal job. There's some wow factor there.
Are there vehicles dealers would like to see added to the Ford lineup?
Dealers are worried about losing sales in that small truck segment. Ford and dealers will have to work on a strategy to make sure we provide the consumers an option. It's a fair dealer concern. There are consumers who just want a smaller truck. But size is only a piece to that equation. I really think it's the affordability of the truck. We need to see how the segment is playing out and make sure we don't leave any throughput on the table.
Have you seen the global Ranger?
I've seen them traveling in other countries. They're going to have to make a decision if that works in North America. Dealer feedback would be that we want one. Whatever Ford decides, we do need to have a new truck for that price sensitive customer.
How do dealers like Ford's digital marketing and prelaunch activities?
With Jim Farley [executive vice president of global marketing, sales and service], there has been transparency. We're talking about launches at the council and the marketing dealer advisory board 15 months before the vehicle is in the showroom - as it moves to digital and customers start to find out about our launches online. That's where a large percent of our customers do their research. You can get a lot of knowledge you can't get in a 30-second ad.
Do you feel Ford has been at the forefront of digital marketing?
It feels like we were willing to take those risks first. You look at a car like the C-Max, and that launch was largely delivered through social media and the Internet. That success story is why we're using digital so much.
What are the top issues for the council in 2013?
To work closely with the company to make sure the quality indexes are back where they were in 2009-2010. Quality is a top priority for us at council. We need to continue to work with the company to take care of our customers in the service department and make sure their experience after purchasing is industry-leading.
Any specifics on service?
You want to make sure you're not overcommunicating to customers about when customers should service their vehicles. We need to communicate with them but not flood them with the wrong messages.
So there have been too many communiqués?
It can be confusing when you're a vehicle owner and you get multiple service messages in your inbox.
How is the relationship with Ford Motor Credit?
Ford Credit had to work their tails off to be there for dealers when things got tough. As Ford has reached investment grade, there's an opportunity to make the mathematics of that relationship make more sense. They've worked to give us every competitive advantage. They've been able to deliver not only on the wholesale side but the retail side to help us get an advantage over the competition.
Would you like to see more leasing penetration?
That's a 2013 initiative for them and us. If we're going to be competitive and reach market share goals in the super segment particularly -- Fiesta-Focus-Fusion-Escape -- we'll have to have competitive leases. One of the best things about the credit company is we have the opportunity to do that. Bernard [Silverstone, Ford Motor Credit CEO] is a real dealer guy, for a banker. He understands the retail side of the business. It's a re-education top to bottom -- working together to raise the lease percentage number. If you look at lease percentages and lease renewals, they all came up in 2012 and will continue to do that in 2013. The competitiveness of leasing in the super segment will increase in 2013.
There's a new Mustang on the way that's going to be sold more widely around the world. Are dealers excited?
There's so much enthusiasm around the next-generation Mustang. We're a big Mustang dealer. In some cases it's the heart and soul of the brand. The car is going to be fantastic. We're ready for a small change in the design of that segment. It's going to be a fun launch.
Ford market share has been slipping. Are dealers concerned?
We need to increase market share. The challenge for 2012 was production. We didn't have enough. If we had had enough we would have sold more. As we get that capacity back in the second half of 2013, we need to be more aggressive and try to gain the share back.
At the end of the day, share is important, but it doesn't pay the bills. You can't take the share to the grocery store and buy groceries.
Ford has talked a lot about the "super segment," including Fiesta, Focus, Escape and Fusion. What does this mean to dealers?
I think as Ford dealers it's important that we study the segmentation more thoroughly than we have in the past because of the growth in what we call the super segment.
Where Honda and Toyota and our competition have been operating at high volumes there, we were historically reliant on the F series and large utilities.
As we got the new product, we really had to put science and math into our business plan so that we use enough resources to get the throughput that the product deserves. That's what our competition is doing.
How do Ford dealers like the new advertising -- for example, the spots showing the engineer who developed the hands-free liftgate on the Escape?
I like product and brand advertising that is realistic to a consumer. I like it because it really stands for what Ford is doing, why it is doing it and the whole "Go Further" promise. You don't do that overnight. It takes years. The attempt to get that across with an engineer about why we built the seat belt the way we did or why we had the "Open Sesame" liftgate, that's important to customers. It doesn't just scream "deal."
Do the Mike Rowe ads still work for the brand?
Consumers see Mike as exceptionally believable. It still cuts through the clutter because he can state our successes and go after our competition without coming across as arrogant. His messaging hasn't worn off with consumers.
What will be the biggest challenge for Ford dealers in 2013?
We will have a chance to grow share quicker than the industry in 2013. To do that, we're going to have to really be better than the competition at retail. We just came through a couple of years where the production didn't allow us to do that.
We've got to go to work and beat the competition at retail. I'm planning my business to grow greater than the industry in 2013, and we'll have to be better than the competition at retail to do that. That's our challenge and opportunity.