FORD MOTOR CO. is stepping up its consolidation of dealer networks in Europe and the USA.
The strategy involves reducing the number of dealerships, increasing sales territories, and forming joint ventures with dealer groups. Ford wants more control over how its customers are treated.
'Customer service is going to be the most important way of judging one brand from another in the future,' said Ford Chairman Alex Trotman. 'We cannot delegate all the responsibility for that service, as we have for the past 90 years.'
Ford formed a joint venture in the UK with Jardine Motors last week. The operation - which is 49 percent owned by Ford and 51 percent by Jardine - will be used as a model for dealerships and business ventures across Europe.
It will initially comprise 11 Ford dealerships and four Iveco Ford commercial vehicle dealerships. They have annual revenues of £350 million ($565.5 million) and represent about 3 percent of total Ford new car registrations in the UK.
The new business is also planning to buy another large Ford retailer in the UK, Dagenham Motors plc. This would bring 10 more Ford dealerships under its umbrella, bringing its share of total Ford new car registrations in the UK to around 7 percent.
'We are looking to grow the joint venture. Dagenham as a group would take us to where we'd like to be,' said a Ford spokeswoman. Dagenham shares rose sharply on the rumors.
The move is similar to a number of deals Ford has struck in the USA, where it has bought out some urban retailers and set up a joint-venture holding company. Further deals may be completed with other major UK Ford retailers. Potential targets include Birmingham-based Evans Halshaw; Pendragon, which represents Ford in much of London; and Quicks, based in Manchester.
'Family-owned dealerships will still exist decades from now,' said Trotman. 'But dealers in metropolitan areas must recognize that traditional automotive retailing is threatened by new players and too many sales points. We have to rationalize our networks, or dealers are just going to go out of business.'
Ford has already assessed what percentage of future sales will come from small dealers, large dealers, Ford-owned dealers, and the Internet.
Auto Collection has been registered as a world retail name for Ford's consolidated dealer operation.
Ford has filed a registration for 10 million common shares in the USA to fund the consolidation venture. In a typical deal, a retailer sells his dealership to the new venture. Ford and the dealer then take shares in the new company.
'We very much want to do this with the dealers as our partners,' said Jacques Nasser, president elect of Ford. 'It will be extremely good for customers, the dealers and for Ford if we control our appetite and progress deliberately. We will (consolidate) where it makes sense and at a pace that we feel is right for us and our dealer partners.'
Ford has spent a long time assessing the potential advantages and disadvantages of the consolidation strategy. 'The bottom line,' said Trotman, 'is that it is a much bigger risk not to do it than to do it.'