Seventeen state dealer groups are joining forces to challenge Ford Division's Blue Oval certification program.
By April, additional states are expected on board, as the dealer associations prepare to fight Blue Oval under federal laws that protect dealers from price discrimination.
Ford is mounting a counteroffensive. On Thursday, March 15, Ford Division relaxed two critical provisions of the program. The company also is pleading with dealers to lobby against the lawsuit, establishing a Web site that allows dealers to e-mail the state associations.
'Ford will let dealers who can't make it wither away on the vine and, thereby, force them out of business,' said Jay Gorman, spokesman for the ad hoc coalition of states fighting the program. Gorman is executive vice president of the California Motor Car Dealers Association.
The coming legal showdown centers on a bedrock provision of the dealership certification program: payments given only to Blue Oval dealers. Ford maintains the payments are legal incentives paid for exemplary performance. Critics argue Ford is practicing two-tier pricing in violation of federal law.
Under the program, dealers are certified when they meet certain customer-service and other standards.
In the 2001 model year, Ford is returning 1.25 percent of each new vehicle's invoice price only to its Blue Oval, or top-rated, dealerships. That means certified dealers will be reimbursed more than $250 for a 2001 vehicle with an invoice price of $21,000.
Ford Division also increased invoice prices 1 percent on all 2001 models, hiking the amount dealers pay for vehicles. So all dealers pay more for vehicles in 2001. But only Blue Oval dealers recoup all of the increase plus another quarter of 1 percent.
Ford maintains that the Blue Oval payments are bonuses not related to pricing.
War chest raised
The ad hoc coalition will challenge Ford under the Robinson-Patman Act, federal antitrust legislation prohibiting price discrimination, Gorman said.
The group, which has raised a $1 million war chest, includes 17 state and 6 metropolitan dealer associations.
Faced with the widening legal battle, Ford is trying to enlist dealers to fight on its side. Ford argues the certification program is working and that 80 percent of Ford Division's 4,100 dealerships will be Blue Oval certified by April 1.
'Since launching Blue Oval, our overall (customer satisfaction) score for 2000 is up two full percentage points, our overall purchase satisfaction is up seven percentage points and our overall service satisfaction is up one percentage point compared to 1999,' said Jim O'Connor, Ford Division president, in a letter to dealers.
Ford said it would relax the scores needed to retain Blue Oval certification in years three, four and five of the program. In addition, the company is extending the deadline for meeting the program's criteria this year. Further, Ford agreed that any changes to the program must be approved by a majority of the Ford Division National Dealer Council.