Ford granted favorable ruling on EV program for dealers

A hearing officer in South Dakota last month ruled Ford Motor Co.'s electric vehicle certification program for dealers does not violate state franchise law, the first such decision on a program that has prompted numerous legal actions and dealer protests.

Meanwhile, cases in New York, Illinois and North Carolina, among other states, are moving forward in what will be additional tests for a retail strategy CEO Jim Farley describes as key to Ford's competitiveness as it attempts to dethrone Tesla as the nation's bestselling EV maker.

The program, which requires dealers to invest as much as $1.2 million and adhere to rigorous sales standards to sell future EVs, has prompted pushback from some retailers who say it violates franchise law by limiting what products they can sell. If a dealer has not opted in to the voluntary program, they will be limited to selling only gasoline and hybrid models starting next year, at least until another enrollment window opens later this decade.

In South Dakota, six dealers argued that Ford unjustly altered their franchise agreements by replacing a former EV certification program that was less expensive with the new requirements. The hearing officer — similar to an administrative law judge — ruled no such violation occurred.

"The implementation of the Model e program by Ford is not a change in the franchise or the dealership agreement," the officer said. "The Model e program is an optional program for petitioners and all other Ford dealerships."

The dealers in that case are expected to appeal the decision.

"The Model e program is a voluntary dealer program designed to position Ford dealers as future leaders in the sales and servicing of EVs for customers," a Ford spokesperson said in a statement. "After examining all the evidence, the South Dakota Department of Revenue ruled in Ford's favor and ultimately concluded that the Model e standards are 'essential and reasonable' for keeping up with advances in technology and meeting customer needs."

The spokesperson declined to comment on other pending cases.

Lawyers in some of those other cases say the South Dakota ruling was limited in scope and may not be indicative of how decisions play out elsewhere around the country.

In New York, four dealers filed a suit against Ford last year alleging the program includes "unlawful franchise modifications, unfair pricing requirements, margin reductions and unlawful allocation systems."

According to Rich Sox, one of the attorneys representing the dealers, both parties have exchanged information and depositions will be scheduled over the next few months. Those deposition requests will likely include Farley, Sox said.

Meanwhile, a provision in New York law could trigger an automatic stay of the program there, and Sox said a judge could issue an order within days on the dealers' motion to enforce that stay.

A similar petition against the program exists in North Carolina, where 46 dealers are not pleased with the various sales practices they would be required to implement, including setting no-haggle prices and offering pickup and delivery.

"Through the EV program, Ford seeks to coerce dealers into expending huge sums of money unnecessarily in order to continue selling vehicles they are already authorized to sell," the dealers wrote when they filed the petition in March. "Ford's EV program will serve to reduce the number of Ford dealers in North Carolina and further restrict consumer access to electric vehicles, particularly those citizens residing in parts of North Carolina outside of the largest cities."

A hearing in Illinois on behalf of 26 dealers began in May and is expected to run through the rest of this month or early August.

It has not been without drama.

Ford this year filed a petition for an emergency temporary restraining order to try to stop the hearing from going forward.

It also asked a judge to block the dealers' request to have Farley come to Chicago for a two-hour deposition, arguing it would "inflict an unjustified irreparable harm on Ford" and that "Farley's schedule is quite full, not only ... between now and May 2, but probably now and the next two years." The company's lawyers also argued Farley "has no unique knowledge about anything at issue," noting other lower-level executives who were deposed could provide all the information needed.

A judge denied Ford's requests, although Ira Levin, an attorney out of Chicago who represented the dealers, said Ford still never made Farley available and was sanctioned over the issue.

Despite the ongoing legal actions, a large majority of Ford dealers support the program. The company has also shown a willingness to tweak some of the most unpopular requirements.

In January, Ford announced changes that included scaling back the amount of time a dealer would have to offer public charging and the removal of a cap that would limit dealers from the lower-priced tier to selling 25 EVs per year.

Following the changes, Ford allowed dealers to opt out of the program or switch tiers. The company said 53 dealers left the most expensive tier, while 24 dealers opted in to the lower tier. Total enrollment fell by 1.5 percent to 1,891 of Ford's nearly 3,000 U.S. dealers.

Lincoln this year modified its version of the program to give dealers more flexibility, easing some rules and deferring the timetable by which they must install EV chargers by four months.

Gary Ackerman, owner of Gaudin Ford in Las Vegas, said he's not concerned about the program or installing EV chargers at his dealership, which celebrated its 100th anniversary in 2022.

"I have a picture of my grandfather's first facility in 1926 with two gasoline attendants dressed in white uniforms ... and a Shell gas pump right in front of the facility," Ackerman said in an interview. "That's the same thing we're talking about today, just a different technology. It's about making your business more convenient for your customer."

Morris Smith, owner of a small Ford store in rural Larned, Kan., said he didn't opt in to the program but doesn't believe his dealership will suffer because of it, at least in the short-term.

"Most of my customers aren't ready for EVs," he said. "The big thing I like about Ford relative to some of the other manufacturers is that they have at least a semi-long-term plan to continue its gas engines. Do I think in 10, 15 years if I stay [internal combustion only], it will be a problem? Absolutely. Long term, we'll have to pivot and adapt."