Ford Motor Co. has declared a moratorium on its Auto Collection stores worldwide.
Ford will continue to operate existing Auto Collection units. But the company will invest only in dealership consolidations now being negotiated and will not open talks with dealers in additional markets, said Brian Kelley, the Ford vice president taking over the Auto Collection strategy Jan. 1.
Ford said this fall that it was scaling back its Auto Collection plans. But now Kelley has spelled out clearly that the Auto Collection initiative is an experiment, not an aggressive drive to consolidate dealerships.
Many Ford dealers, fearing competition from the factory, oppose Auto Collection. The National Automobile Dealers Association also opposes the consolidations.
In the United States, Ford operates five Auto Collection stores and is negotiating with dealers in three additional markets, Kelley said.
'We are not going to be much more than we are today,' Kelley said in an interview with Automotive News. 'We don't think today we are at the point where we can say this is the model, everybody else come and learn from what we are doing. We want to stop the expansion of these until we do get to the model.'
THIS IS A TEST
The Auto Collection stores are returning to their original mission: to test new retailing ideas. For example, Ford will use them to test Internet strategies, Kelley said. He also oversees Ford's e-commerce strategy.
As recently as June, Ford said that up to 10 new markets could be consolidated. But in the fall, Ford began throttling back on its dealership-consolidation plans. The company purchased controlling interest in its troubled Auto Collection stores in Salt Lake City and Tulsa, Okla., at that time.
In 1997, Ford started establishing Auto Collection stores in metropolitan markets. Dealers and the automaker jointly own the stores, which handle sales and service in an entire market.
Kelley, 39, who joined Ford from the appliance division of General Electric in June, said Ford will test a variety of retailing concepts. For example, Ford may try to create two distinct selling experiences for two brands in a single showroom, he said. Ford also wants to learn how many - or how few - dealerships are needed to gain economies of scale in various dealership operations.
'The whole idea is how do you create a model that enhances the consumer's purchase experience and that combines e-commerce and does all the things we want to do to create a new retail model of the future,' Kelley said.
'It may be that consolidation is great in some areas and not in others,' he said. 'It may be that two stores are what you need to get some backroom benefit. We don't believe there is one answer for every market.'
Ford executives admit the company tried to reach too far too quickly when launching the Auto Collection strategy. For example, the Utah Auto Collection is Ford's largest with 1,500 employees and more than $750 million in annual revenues.
'For the last two and one-half years we learned that it is very difficult to make major changes quickly in some of these dealerships,' Kelley said. 'You have to have patience. You have to have a vision of what it is you are trying to create.'
Market share and profits are improving at the Auto Collection stores, he said. Some operating practices are changing. For example, Ford now requires Auto Collection stores to use no-hassle selling but does not mandate one-price selling. Auto Collection stores are abandoning centralized management and returning dealers to dealerships.
In the United States, Ford operates Auto Collection stores in Salt Lake City; Oklahoma City and Tulsa, Okla.; San Diego; and Rochester, N.Y. Ford has told the Virginia Department of Motor Vehicles it plans an Auto Collection in Richmond.
Auto Collection stores also operate in Quebec; metropolitan London; Auckland, New Zealand; Perth, Australia; and Stuttgart, Germany.