Prodded by the growing influence of the Internet, Ford Motor Co. is seizing more control of its customers by telling Web shoppers how to pay below the sticker price.
The revolutionary change is only under way in a small experiment in Arizona, but influential Ford dealers are fighting it. They say it intrudes into their domain: price negotiations.
Traditionally, a vehicle sticker price has been a starting point - carefully observed by manufacturers - for dealers to negotiate prices.
Not anymore. Ford's experiment gives Internet shoppers a lower 'e-price' instead. The e-price is based on actual vehicle transaction prices derived from dealer financial statements. Participating dealers guarantee the e-price to shoppers.
The experiment is under way at four dealerships in Arizona. The Ford Division National Dealer Council is fighting the transaction-price disclosure and expansion of the program.
'We lose control of everything,' said Jerry Reynolds, chairman of the Ford Division National Dealer Council and owner of Prestige Ford in Garland, Texas. 'Suddenly, we have a manufacturer who sets window sticker, dealer invoice and now the transaction price taken from dealer financial statements.
'To get an average transaction price, you have to have high deals and low deals. This eliminates the high deals. So over time, the average will continue to drop until there is nothing left.'
The test is part of a larger Ford effort to gain more control of customers and combat online auto-shopping services. Ford is fighting to keep customers loyal to the blue oval as the growing number of Internet shopping sites dilutes brand clout.
Lincoln Mercury is testing an online service to guide customers through purchases. Ford Division is trying a concierge program that caters to owners of any vehicle make, arranging routine maintenance, test drives and new- and used-vehicle purchases.
Currently, many Web shoppers move on to independent online buying services such as Autobytel.com, CarsDirect.com and CarPoint.com in a search for price information.
The Ford Web site delivers an 'e-price promise.' The site promotes the program as 'the simplest, most convenient way to get a fair price on your next Ford vehicle.'
A Ford spokesman declined to comment on the program because it is a test.
HOW IT WORKS
Under Ford's e-price program, consumers select and configure a vehicle with desired options at the Ford Web site. Shoppers who enter the ZIP code of the Arizona test market are instantly given the manufacturer's suggested retail price and the average transaction price for the specified model. Other shoppers receive the sticker price only. E-price shoppers also are given the names of designated e-price dealers.
Four dealerships selling Ford, Lincoln and Mercury models in the Tucson, Ariz., market are participating in the test, which began Oct. 28, said Mark Phelps, general manager of Oracle Ford-Mercury in Oracle, Ariz., one of the participating dealers.
Dealers agree to respond to e-price shoppers within two hours and to honor Ford's e-price. Transaction prices are based on regional sales, Reynolds said.
'If consumers were to accept the e-price, I suppose the program would work well,' Phelps said. 'But what if they have the mind-set that this is a new point of negotiation? There is no room to haggle in these e-prices.'
Phelps said he supports Ford's effort to keep customers from third-party Web sites, despite concerns about the test. 'It is way too early to pass judgment on the pilot program,' he said. 'It is not even being advertised yet.'
So far, five dealership customers using Ford's e-prices have bypassed the system, Phelps said. Ford wants customers to submit a purchase request based on the e-price. The company then forwards that request to the selected dealer.
Instead, customers are obtaining the vehicle transaction price, logging off and then using that information to shop.
'They come into us with price in hand,' Phelps said.
Ford's program robs dealers of the flexibility needed to structure a deal, said council Chairman Reynolds. Locking in a new-vehicle price gives dealers little room to write an over-allowance on a vehicle trade, an industry practice that allows dealers to satisfy customers seeking as much money as possible on a trade-in.
Phelps' experience selling one vehicle using the e-price program underscores the trade-in issue. After receiving a price quote from the dealership for a Mercury Cougar, the customer obtained the e-price from the Internet. Phelps' dealership rewrote the deal. But the customer wound up paying nearly the same out-of-pocket cost, Phelps said.
'The e-price was $400 less than what we had originally submitted to them,' Phelps said. 'So we dropped the cash on the trade by about $400. On most deals we over-allow on the trade because customers are always convinced the trade is worth more than the actual cash value. A lot of customers will negotiate a deal and then go out and get the e-price.
'That is fine as long as they understand they won't get the same trade allowance.'