Ford Motor Co. won the first round in a legal conflict over whether it can reject the sale of a San Diego Ford dealership to publicly held Asbury Automotive Group of Stamford, Conn.
An administrative law judge has sided with Ford and against megadealer Bob Baker, who claims Ford unreasonably blocked the sale of his Ford store to Asbury in 2002.
California franchise law only bars manufacturers from turning down the sale of a dealership if it does so unreasonably. The judge found that Ford acted reasonably when it rejected the sale of Baker's Ford dealership to Asbury.
The case is scheduled to be decided by the California New Motor Vehicle Board June 17, which will accept or reject the judge's proposed decision.
Ford argued that Asbury needs to dramatically improve sales and customer satisfaction at several of the Ford dealerships it already owns to acquire any more Ford franchises.
In 2001, four of the seven Ford dealerships owned by Asbury had market share below regional average for cars; four had market share below regional average for trucks; and four had below-average customer satisfaction scores for dealerships the same size, according to the judge's proposed decision.
Ford claims the seven stores experienced a 32 percent cumulative decline in unit sales from 1999 to October, 2002, though nationally Ford's unit sales declined 3.2 percent over the same period, the document points out.
"Had Asbury performed at exactly the same level before it purchased the dealerships, Ford would have sold 5,218 more vehicles," the judge wrote.
Baker argues he had an excellent performance record and he and his sons would continue to run the Ford store after it was sold to Asbury.
But "Ford found, with few exceptions, each time Asbury purchased a Ford store, the sales performance and customer satisfaction of that store would decline," the decision says. "This was the case, irrespective of whether or not the original CEO remained in charge of the dealership."
Asbury CEO Kenneth Gilman says he was disappointed with the proposed decision. "Since the current management team started in December 2001, Asbury's performance at its Ford stores has been better than Ford's overall performance in unit sales. For example, in 2002 and this year to date, six of our seven Ford dealerships have generated sales increases above their respective regions."
Ford's resistance to the transaction has held up the entire $88 million sale of Baker's six dealerships to Asbury. If the board accepts the judge's decision the entire deal is likely to collapse. The legal record shows Baker has said he is unwilling to break up his retail chain.
The Bob Baker Auto Group ranked No. 62 on the Automotive News list of top dealership groups in 2002, based on total retail sales. Baker's six dealerships sold 11,299 new retail units and had revenue of $442 million.