DETROIT - Departing from tradition, Ford Motor Co. is encouraging its dealers to acquire additional franchises in the Ford family. The new global strategy could result in fewer, more profitable retailers selling higher volumes.
In the past, Ford discouraged its dealers from acquiring additional company franchises. The company tended to award open franchises to experienced dealers of competing makes.
Now, Ford wants its best dealers to spend time and money selling the company's eight brands, not those of competitors. The company expects the larger dealerships to be more profitable and better able to serve customers.
Ford is imposing a tough, new condition on dealers. Dealers awarded an additional company franchise must create dealerships with separate showrooms and storefronts visible from the street for each brand.
'In the past, it has been very difficult for an existing Ford Motor Co. dealer to get another one of our franchises,' said Jim Schroer, Ford vice president of global marketing. 'This is a reversal of our prior policy.'
Schroer described the distribution strategy as 'a long term, evolutionary change. The best retailers will be encouraged to pick up other of our franchises when they become available, which isn't very often.' Ford will not invest in any of the ventures. But the company will foster deals by making loans available to dealers, Schroer said.
Dealer Jerry Reynolds, chairman of the Ford Division National Dealer Council, endorsed the plan.
'This shows a confidence in us when there are new opportunities and new franchises. It is like the way that I run my business - I promote from within. It is very healthy for them and very healthy for us.'
Reynolds owns Prestige Ford in Garland, Texas.
The Ford Division in the United States will be the least affected by the worldwide policy change, Schroer said. That is because the division's dealerships already are high-volume, profitable enterprises, he said.
For example, a market with 10 well-performing Ford Division stores likely will retain those dealerships in the next five to 10 years, Schroer said. But one or two Ford dealers in the market likely will add additional company franchises in upcoming years, he said.
For example, many Mazda stores are dualed with Volkswagen and General Motors brands, Schroer said.
Now, Ford Division dealers are eligible to add Mazda to their portfolio, a practice discouraged in the past, he said. In the United States, Ford Division averaged 846 new vehicle sales per dealership in 1999, a strong showing. But Mazda dealerships averaged only 311 units last year. Toyota led the industry at 1,079 sales per outlet.
PREMIER PLOWS FORWARD
Ford's luxury brands will be the first to employ the new concept in the United States. Ford's Premier Automotive Group, which manages the company's Volvo, Jaguar, Lincoln, Land Rover and Aston Martin brands, is creating large retailing campuses selling multiple brands under a single operator.
Premier dealers expect to open 10 such showcase dealerships within 18 months, according to Vic Doolan, the executive overseeing the strategy. In some cases, the company will approach dealers in randomly selected markets, Schroer said. In other markets, dealers will initiate negotiations.
Eventually, the policy could result in fewer company dealers worldwide, Schroer said.
'The driving factor is that instead of having our dealers feel they have to have a competitor's franchise to have a high enough volume to make money, we now want to make it easier for them acquire other Ford Motor Co. franchises,' he said. 'Owning three or four franchises will help that owner have a higher volume and make more money. We benefit because the dealer can do a better job taking care of the customer and marketing the brands.'
The new policy is the latest step in Ford's brand building effort. Ford is trying to make its vehicle design, retail showrooms and advertising reflect a distinct personality for each of its brands.
Some Ford Motor dealerships with multiple brands have created 'brand salad,' Schroer said. They park different vehicle brands side by side in their showrooms, he said.
The biggest impact of the policy change will be in Europe, Schroer said.
'In many cases, especially outside the United States, the volume per store for each different brand is too low for the dealer to do an adequate job on customer service and to make money,' he said.
To coordinate the strategy, Ford is creating new teams to evaluate how the brands are represented in each market.
In the past, each brand worked unilaterally. Now, the company will rely on a team of people representing all corporate brands.