DETROIT - Ford Motor Co. is finishing a plan to slash the number of its domestic-brand dealerships in 18 major metropolitan markets.
The list of markets focuses on the Northeast and the Midwest, dealer and Ford sources said. Markets targeted for cuts include Detroit, Chicago, Boston, New York and Philadelphia. Los Angeles and San Francisco also are on the list, which wasn't shared in full with Automotive News.
Given its drastic drop in U.S. sales and market share, Ford Motor has too many dealerships selling Ford, Lincoln and Mercury vehicles, and profits of those stores have declined.
Ford officials wouldn't comment on specifics of the plan, but they acknowledged that reducing the dealership count is a goal of the current leadership team.
"This is an issue that primarily affects urban metropolitan markets where we have multiple dealers in a relatively confined geographic area," Ford spokesman Jim Cain said. "What you want to avoid is Ford dealers competing against Ford dealers. We want them competing with General Motors and Chrysler and Toyota."
Ford Motor officials insist consolidation will be done through collaboration, not strong-arming. One approach is letting a franchise expire when a dealership goes out of business. In the past, Ford often tried to replace those points even in highly competitive markets.
But relying on attrition alone would drag out the process for many years. Some dealers expect Ford to accelerate attrition in part by cherry-picking the strongest dealers in targeted markets and working with them on plans to buy out weak dealers.
Ford Motor lost more than 1 million units of sales in the United States from 2000 to 2005. The combined market share of its Ford, Lincoln and Mercury brands fell from 25.7 percent in 1995 to 17.4 percent in 2005.
Dealership profits have plunged for several years, and many stores are in the red. Average dealership profits continue to fall in 2006, down 8 to 10 percent through April, Ford has said.
Trimming stores should reduce price competition among dealers in a given area and increase the average sales per dealership. The automaker had 4,396 U.S. Ford, Lincoln and Mercury dealerships at the end of 2005.
Managers at Ford Motor's regional offices are expected to take the lead on customizing consolidation strategies for individual markets.
Tom Addis, chairman of Ford's national dealer council, expects to discuss the plan when the council meets next week in Dearborn, Mich.
Despite dealer complaints about too much homegrown competition, figuring out who goes will be difficult, said Addis, dealer principal of Lake City Ford in Coeur d'Alene, Idaho.
"There have been a tremendous amount of requests from the dealers the last few years to do this," he said. "But everybody wants to go to heaven, and nobody wants to die."
You may e-mail Amy Wilson at [email protected]