Ford Motor Co. plans to give dealers majority ownership of a new corporation that would control Ford's sales and service in the entire Indianapolis market.
But Ford would hold veto power over some retailing decisions, said sources familiar with the auto company's sweeping plans. Ford is expected to demand that Indianapolis stores have no-haggle pricing, salaried salespeople and extended service hours.
The proposed ownership of the venture emerged last week from sources familiar with Ford's plan. The company wants to transform the Indianapolis market into a retailing laboratory to test major trends sweeping the industry.
Under the proposal, the new venture would acquire control of 21 Ford and Lincoln-Mercury dealerships in the Indianapolis metropolitan area. Previously, Ford was thought to be targeting 18 stores.
The dealerships would be replaced by two Lincoln-Mercury megastores, four to five Ford Division stores and seven satellite service centers, sources said.
Under the proposal, Ford said it would own no more than 49 percent and the dealers would own the rest. It's not clear how much ownership Ford wants to take in the new venture. If it did own 49 percent, that would be tantamount to control. Ford has already said it would appoint the top manager of the venture.
If Indianapolis dealers reject the program, Ford will approach dealers in San Diego or Salt Lake City, said a source familiar with Ford's plans. A Ford spokesman would not comment on what cities might be under consideration, although the company has said it may make offers to dealers in other 'medium-sized metropolitan markets.'
In a meeting with automotive analysts last week, a Ford executive indicated the company could eventually expand the Indianapolis strategy to as many as eight markets, said an analyst who attended the meeting but declined to be identified.
Last week, accountants and representatives from Ford Motor's Dealer Development operations began visiting the 21 affected dealers in Indianapolis. Ford wants the dealers to open their books to the company.
Meetings will continue this week as the Ford officials seek written permission to examine the operations of the 21 stores.
If dealers agree, the financial review is expected to take one to two months, according to the company's tentative timetable. But Robert Rewey, Ford group vice president of marketing and sales, and Tom Wagner, Ford vice president of customer communication and satisfaction, are said to want faster results. The two executives are leading Ford's campaign in Indianapolis.
START WITH THE BIGGEST
'We won't see offers until August or September,' a dealer said.
Ford is approaching 21 dealers.
The newly identified retailers are: Andy Mohr Ford in Plainfield, Raceway Ford in Brownsburg and Wabash Ford Truck Sales in Indianapolis. Ford's strategy for taking over the Indianapolis market is becoming clearer, said several affected dealers who declined to be identified.
Ford is wooing key high-volume stores, knowing that smaller dealers may then have little choice but to fall in line, the dealers said.
'My gut feeling is that the takeover will happen,' a dea-ler said. 'Ford wants it to happen. I think they will be reasonable with the dealers.'
Another dealer who also declined to be identified said no consensus about cooperating or resisting Ford is emerging among the 21 affected retailers.
'The only consensus is 'Show us the money.' We may never act as a group,' the dealer said. 'We all agree to disagree.'
Dealers say they cannot make a decision to sell to Ford without a specific financial offer. Ford will offer dealers cash, stock in Ford Motor Co., stock in the new venture, or a combination of those incentives, dealers said.
Eventually, the venture may go public.
According to informed sources, Ford will not know how much money will be used to capitalize the new venture until dealers specify their buyout demands.
HOW MUCH MONEY?
In a slide presentation to dealers May 5, Ford indicated it was willing to spend $155 million on the venture. But Ford did not spell out whether the figure would cover buyouts as well as other parts of the plan. Ford will not confirm the $155 million figure.
Wall Street analyst John Casesa of Wertheim Schroder & Co. said the price tag just for buying out the dealers could reach $200 million.
Some dealers doubt the new venture will spend heavily to construct four to five new megastores.
'Indianapolis is a very compact market,' said a dealer. 'The prime locations are all taken. They are either held by us or by competing dealers. And every Ford store in town is either new or has been rebuilt within the last five years.'
Wall Street already has begun questioning Ford's wisdom in diverting money from product operations to underwrite a new retail strategy.
'There is a concern on the part of analysts,' said David Garrity, analyst with Smith Barney. 'Here is Ford reducing cost in their product operations. If they are going to be investing substantial dollars in changing their distribution, where are the actual net savings going to be realized?'
However, Ford indicated to analysts at the meeting that 'they are trying to realize savings in their product side and that they are not necessarily going to reinvest that automatically in their distribution side,' Garrity said.