Ford to pare dealerships

With its market share down, No. 2 U.S. automaker seeks `voluntary' cuts

August 15, 2006|By BLOOMBERG NEWS

DETROIT -- Ford Motor Co. plans to shrink its network of U.S. dealerships because it's selling fewer vehicles and wants to reduce competition among Ford outlets.

"We have more dealers than we can support profitably," spokesman Jim Cain said yesterday. "Our dealers have said increasing dealer profitability is the No. 1 issue they want us to focus on."

Most of the Ford, Lincoln and Mercury retail outlets that would be eliminated are in metropolitan areas, Cain said.

The reduction would be "strictly voluntary," Cain said, declining to give details.

Ford, the second-largest U.S. automaker, wants to trim dealerships after its share of the U.S. new-vehicle market fell to 18.1 percent during the first seven months of 2006, from 25.7 percent in 1995, the last year Ford recorded a market-share gain. Its U.S. sales have declined 9.7 percent this year through July.

"The dealers have been requesting this for a long time, for years," said Tom Addis, chairman of Ford's national dealer council and the owner of Lake City Ford in Coeur d'Alene, Idaho. "The market has changed. We have too many dealers."

Ford is still in talks with dealers, Cain said.

The plan to shelve retail locations was reported yesterday by Automotive News, which said the closures may come by buying out dealers or not replacing franchises that go out of business.

Cain said Ford's plan doesn't rely solely on attrition. He declined further comment.

The closings will be in Chicago, Boston, New York, Los Angeles, Philadelphia, San Francisco and at least 12 other markets, Automotive News said, citing dealers and Ford officials it didn't identify.

The publication said it didn't have a complete list of affected cities, and Cain declined to say which areas have too many dealers or how dealerships would be eliminated.

$1.6 billion loss

The automaker said in January that it would cut up to 30,000 jobs in North America by 2012, and said in July that it intends to make additional restructuring steps it hasn't identified. Ford had a $1.6 billion pretax loss in North America in 2005.

The reduction in retail outlets isn't related to the additional job-cutting and restructuring in North America, which Ford plans to announce in September, Cain said.

The automaker has about 4,300 Ford, Lincoln and Mercury dealers in the United States.

In metropolitan areas, where Ford intends to reduce outlets, the company usually has multiple dealerships.

Some of the dealerships that may be affected are in spots "where the real estate is going to be more valuable" than the outlet, Addis said. He said he couldn't confirm that 18 areas would be affected.

Focus on competition

In July, Ford-brand dealerships averaged sales of 53 vehicles each compared with 177 vehicles for each Toyota-brand dealership, according to data compiled by Automotive News.

Toyota Motor Corp. typically has fewer dealerships in each metropolitan market than Ford.

"We want the focus on competing against Toyota, Nissan, Chevy, Honda and Hyundai," Cain said.

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