Ford to close dealerships

Sam Eaton Aug 15, 2006

KAI RYSSDAL: Let me get back to something Diane talked about a minute ago, though. Cars. A customer satisfaction survey out today showed domestic carmakers mostly lagging behind their foreign competitors. Ford came in dead last. Customers aren’t the only ones Ford ought to be worried about, though. The carmaker announced plans today to cut the number of its dealerships in 18 big cities. That should boost profits for those that survive. But not everybody’s pleased. Marketplace’s Sam Eaton has the story.

SAM EATON: Ford says too many dealerships are the problem. They often end up competing against each other for sales in the same market. Dealerships’ profits have slipped 10 percent this year alone. Automotive News reporter Amy Wilson says when dealers don’t do well, neither does Ford.

AMY WILSON: Well if the dealers aren’t making very much money they probably can’t promote the brand the way it should be promoted. They can’t take care of customers the way they should be taken care of.

By axing dealerships in mostly Midwest and Northeast cities such as Chicago, Boston and New York, Ford hopes to bring dealer numbers back into balance with the company’s slipping market share. Something University of Maryland business professor Peter Morici says is the heart of the problem.

PETER MORICI: Got to remember, Ford in the early 1990’s had 26 percent of the US market. Now it has 17 percent. Ford and General Motors continue to shed market share together and the Japanese continue to increase their market share. And we’re getting down to the point where the Big Three should really be the Big Two.

Morici says Ford’s latest plans are just another step in the company’s long retrenchment, which has been marked by a series of failures. Only this time around Ford is looking beyond its corporate walls for help. Ford’s dealerships are independently owned franchises and whether they’ll go along is another story.

Michael Regan is with the National Automobile Dealers Association. He says dealers have made significant investments in the Ford brand and that gives them the right to call their own shots.

MICHAEL REGAN: Our feeling is that the ultimate decision on the business future of a dealership should be the dealer’s decision.

Regan says if Ford really wants to alleviate its dealers’ sinking profits, it should make cars they could actually sell.

I’m Sam Eaton for Marketplace.

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