Anyone surprised by Ford Motor's decision to eliminate dealerships hasn't been paying attention.
When you're selling 1 million fewer units than you were five years ago, it means your dealers are selling fewer cars and making less money -- or in some cases, losing money. For the good of the many, some of the weaker points need to be closed.
Think of it as pruning. I know that's hard to do if it's your store being snipped, but something has to give.
Things have been tough for Ford and Lincoln Mercury dealerships in several old, established urban markets, especially in the Northeast and Midwest -- even in the shadow of Ford's Glass House headquarters in Dearborn, Mich.
In the Detroit market, A-plan and X-plan discount sales typically account for as much as 80 percent of a dealership's retail business. A-plan deals don't have the fattest margins, but they're no-brainers because it's like selling to your sister's kid.
Unfortunately for Detroit area dealers, the local economy is still in tough shape.
How tough? Last year the 31 Metro Detroit Ford dealers rang up about 50,000 new-vehicle sales and leases, less than half what they sold just a few years earlier, according to a local Ford dealer.
With the Detroit 3 and their suppliers shedding jobs -- and the promise of more to come -- many A-plan and X-plan customers are skittish and reluctant to buy or lease anything more expensive than a stick of gum.
And because many supplier employees can get a discount at any General Motors, Ford or Chrysler group dealership, competitive offers can make a difference to X-plan buyers. One Detroit Ford dealer blames aggressive Chrysler programs for part of his sales letdown last year.
For the dealerships that make the cut, it has to get better sooner or later, doesn't it?
You may e-mail Edward Lapham at [email protected]