After Ford Motor Co. made its big announcement about Indianapolis a few weeks ago, everybody fell still, sort of like the aftermath of a big hurricane.
But lately, there have been some inter- esting observations.
This is a noble experiment and as long as we're not talking about my dealership, let the games continue. Obviously, if I were a dealer and planned for my kids to take over one of my Ford dealerships in Indianapolis, or one of the other cities where Ford will experiment, I wouldn't be too happy about this Ford dealership program.
One of the ironic things is that Ford might have to try a little of the same magic as Wayne Huizenga. The growth of AutoNation and the purchase of all those dealerships has been done with Republic Industries stock that basically is being funded by investors who believe in what Republic is doing.
Someone once told me that dealers in the United States have as much invested in their property, buildings and equipment as all the automakers. Mike Jackson of Mercedes-Benz told me that Mercedes dealers in the United States had recently invested an amount equal to what Mercedes spent in Alabama.
So where is Ford going to get the money? If Ford decides to buy out all the dealerships in Indianapolis, as well as three or four markets of similar size, it will take hundreds of millions of dollars. Maybe a billion dollars. And then Ford will be the proud owner of all the dealerships in four or five markets and will control its own destiny in those markets - something that most factories think they already do with their franchised dealers.
It seems logical for Ford to do what Republic is doing: Offer the dealers paper.
It could be new shares of Ford stock, which would dilute every other shareholder's investment. Or, Ford could offer dealers shares in a new company, which would be a bit of a risk, particularly for dealers who might not be too excited about giving up their dealership in exchange for stock in an unproven company.
One of the simplest reasons that the franchise system has worked so well is the tremendous amount of capital that it takes to establish a distribution system. I don't care if you're selling pizzas or Cadillacs, it takes a lot of retailers to move the product, and it's expensive to set up a distribution system.
Ford faces some real challenges, and money is just one of the smaller ones.