Ford Motor Co. executives will meet with Lincoln-Mercury dealers this week to talk about the future of their business and Ford's consolidation activity. Chris Lemley, a Boston area Lincoln-Mercury-Ford-Mazda-Kia dealer, shares his thoughts on the consolidation strategy.
For two years, Ford Motor Co. has been pushing a defeatist strategy of dualing Ford and Lincoln-Mercury in metro markets. Everyone agrees that Ford has too many dealers, but reducing two Ford and two Lincoln-Mercury dealers to two Ford-Lincoln-Mercury stores isn't a reduction in the size of the network. It's an unconditional surrender to Toyota, Honda, Nissan and their sibling luxury franchises.
It's time for Ford to change course and focus its energy on delivering world-class, distinctive product to both of its North American distribution networks -- for Ford and for Lincoln-Mercury. Many Lincoln-Mercury dealers made substantial investments over the past decade based on representations of a future product plan that largely has not been executed. It's not too late for Ford to deliver. With the market shift to cars and crossovers, the Lincoln-Mercury dealer network can be an asset.
At its heart, the dualing strategy is inherently defeatist, since the implication is that the two networks can't survive independently. In most cases, a Ford dealer is allowed to add Lincoln and Mercury in their existing facilities with little more capital investment or brand separation than buying a brand sign.
This plan has been bad both for most dealers and for Ford for several reasons.
First, while many Ford, Lincoln and Mercury products may be functionally similar, they are intended to be marketed to different customer segments in a different way. Most dealers selling both brands from the same showroom do not stock a comparable selection of Ford/Mercury siblings, and typically it is Mercury that has been shortchanged.
Second, the dualing strategy upsets the competitive balance between dealers. Anyone who has all the franchises is a threat to a dealer who only has one, so dealers who don't dual are weakened.
And third, the gross profit opportunity afforded by Lincolns removes the profit pressure for a Ford dealer to sell more Fords, even if the dealer sells fewer Lincolns than a standalone Lincoln-Mercury dealer would have. This is likely, since most Lincoln customers won't be caught dead in a Ford store's service department.
So there's a good chance the result is a more profitable dealer who sells fewer Fords, fewer Lincolns and fewer Mercurys, as well as a weaker surrounding dealer network.
It's a truism that there are too many dealers, and consolidation is needed, but dualing is not the right approach. On the distribution strategy, the model that Ford should follow for Lincoln-Mercury is Lexus. Lexus has a limited number of dealers with high sales and profit per outlet, and in major markets is not dualed with Toyota. This approach hasn't hurt their sales. It's helped them maintain brand identity and grow share.
But instead of emulating Lexus, Ford is copying Buick-Pontiac-GMC and Chrysler-Jeep-Dodge. I thought the days of Ford blindly copying its domestic competitors were over, but apparently in this area, they're still willing to jump off the same bridges.
Already, we are beginning to see signs that this dualing approach will translate into fewer product offerings for Lincoln-Mercury. For instance, the 2010 Taurus, planned for just a year from now, is a stunning product that will address several shortcomings in the current car.
But if their plan is not to have a Mercury version of that vehicle, as recent press reports indicate, it's a mistake. Mercury has sold larger cars in volume for a long period of time, even when the cars were allowed to languish through multiple cycles without meaningful improvements.
Mercury dealers and sales and service staffs have relationships with customers who purchase these cars, and many Ford dealerships do not. But it should not be an adversarial, either-or relationship but a symbiotic one. The incremental volume from Mercury should provide revenue that helps justify investment in future Fords as well.
Most Lincoln-Mercury dealers are prepared for the Grand Marquis to go away at some point, and many of us have focused on getting Grand Marquis owners to move into the Montego/Sable. It makes no sense to do that only to pull the plug on both cars. That's the same misguided mind-set that has led Ford to abandon models repeatedly, a practice Alan Mulally has correctly criticized.
Since 1994, by my count, Ford has killed off 16 Lincoln-Mercury model names: for Mercury, the Tracer, Topaz, Mystique, Cougar (twice), Villager, Monterey, Marauder, Sable and Montego; for Lincoln, the Mark VIII, Continental, Blackwood, LS, Aviator, Zephyr and Mark LT.
In almost every case, the customer base for these products has migrated not to Ford dealerships but to competitors. Our Continental customers, for instance, were furious that a suitable replacement Lincoln product was not available and flocked to Lexus.
Now that we have a suitable product in the MKS, we are fighting to bring them back, with the vast majority of the current volume coming from nondualed Lincoln-Mercury stores. The No. 1 comment from those customers is, "Why did Ford take so long to make something that would appeal to us?"
The same logic applies to Mercury. When the Mercury Tracer was canceled almost a decade ago, Ford assumed those customers would cross over to the then-new Ford Focus. But those 40,000 customers did not behave as expected and went to the competition. Mercury needs a new small car, and if we're getting one, that's great.
But if Ford truly is committed to the Mercury brand, a product strategy for Mercury needs to be more than one car deep. Somehow over the last 10 years, "rebadging" became a dirty word. But the difference in rebadging and platform sharing often is in the eye of the beholder. People who buy Lexus ES 330s don't consider them rebadged Camrys anymore.
With all the different existing variations of Ford's European product, there is ample variation in body styles alone to fulfill the product needs of both Ford and Lincoln-Mercury.
As Ford makes the transition from being truck-dependent to focusing on cars and crossovers, the Lincoln-Mercury distribution network can be a source of strength for Ford, if they only will realize what they have.
Even today, in its weakened condition, the Lincoln-Mercury network is stronger than 80 percent of the other brands sold in North America. Most manufacturers would kill for the dealership operators and locations that we collectively represent.
We have remained viable and loyal even as our manufacturer squandered resources on Jaguar and Land Rover and junkyards and Kwik-Fit. If Ford had invested even half the funds they wasted on Jaguar on building a competitive Lincoln lineup, Lincoln would be one of the pre-eminent luxury-car brands in North America today.
Yet even after hiring two vice presidents with ties to Lexus, Jim Farley and Ken Czubay, Ford insists on pursuing the same misguided dualing scheme that was hatched two years ago.
Ford has been willing to steal top talent from Lexus. Why not borrow their distribution strategy?