Ford plans sweeping dealer closures to accelerate Europe rebound

Ford's plan to shrink its European retail network to help the unit return to profit in the region will result in deep cuts to its dealers, particularly in the UK.

Ford of Europe President Stuart Rowley declined to say how many dealers will be slashed. “It will be appropriate for the market,” he told Automotive News Europe.

Up to 180 of the 400 dealers in the UK, Ford's biggest market in Europe, are at risk of closure, the Auto Retail Agenda newsletter reported last month.

Cutting the number of dealers will improve profitability at Ford, Rowley said. “There is obviously a lot of cost wrapped up in the distribution network and that ends up in the price of the vehicle or coming out of profit,” he said. “We want to make the network more efficient.”

He also believes the reduction will help Ford’s retailers. “Our dealers are private investors who expect a return on that capital,” Rowley said.

The overhaul of Ford’s European distribution network will include an accelerated shift toward online sales in reaction to changes in consumer demand.

“The retail world is changing,” Rowley said. “We think over time we will have fewer [dealer] owners and fewer physical sites.”

The roll out of Ford's online sales system in Europe will coincide with the launch of the Mustang Mach E electric SUV, which arrives later this year.

“All of us now expect to transact much more online,” Rowley said. “Customers want to be able to order their vehicle online. They want to pay for it online. They want a single interface.”

Automakers need to find savings elsewhere to pay for this new digital investment, said Steve Young, managing director of dealer analyst firm ICDP.

“Those digital channels need to be paid for and there is no magic money tree, so you have to take cost out somewhere,” he said.

Automakers such as Ford, which is also in the process of slashing 12,500 jobs in Europe, are right to downsize their dealer network as customer needs change, Young said. “Networks are still planned around outdated 30-minute drive times, but customers' willingness to drive has increased,” Young said.

Ford said that 90 percent of the UK population would still be able to reach one of its dealerships by car in 30 minutes after the reduction.

Ford is looking to switch some dealerships to service-only centers as part of the European network overhaul, Rowley said. The automaker is also looking to focus more on dealers that specialize in selling the brand’s successful family of Transit commercial vehicles with an emphasis on servicing.

“This is effectively somebody's business and livelihood. So our objective is to have them on the road faster,” Rowley said.

The new Transit centers wouldn’t have to follow the location strategy as car dealers. “They don't necessarily need to be a nice glass box in that certain part of town,” Rowley said. “They may need more space because they might want to have a much more complex product offer.”