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BlueOval Certified - Bad for dealers. Bad for consumers.
Published: 03 April 2001
By: Dr. Randy Fuller
Source:
Updated:
Imagine you are in an auditorium full of 7,867 people. There is a handsome gray-haired man standing on the stage. He says to you, "Stand up and introduce yourself to the person in front of you, behind you, and then on both sides of you, and then please sit down." The gray-haired man then goes on to inform you that of the five people in your little group (this includes yourself, of course) one of you will not leave the room alive. If you were paying attention, you just realized that this kindly, handsome, gray-haired man just said that twenty percent of everyone in the room with you is a dead person. Well, that is exactly what Ford Motor Company is saying to their dealer body. That 1,200 of Ford's dealers are no longer welcome, and Ford would like them out of the business.
In reality, the numbers become even more ominous when you consider that the 1,200 dealers Ford is talking about come from the ranks of about 2,500 dealers. These 2,500 dealers are called Select Dealers and they account for about 31% of all dealers. A Select Dealer is a smaller, more rural dealer, versus the large metropolitan dealers that Ford calls the Contact Dealers. Drive around your town this weekend. Drive down to your local Ford dealer. If you live in rural America and this is the only franchised auto dealer in town, chances are this dealer is targeted for eventual elimination. If you live in a smaller town that also has a General Motors or Chrysler dealer in it, then chances are that your dealer will be spared for now. Why is Ford doing this? How is Ford doing this? These two questions are on the minds of every Select Ford Dealer in America right now.
Why is Ford trying to reduce the number of dealers? Very simply Ford believes that they have too many dealers. Ford believes that it is too expensive to provide the infrastructure to service the more rural dealers. Every dealer has to be supplied with vehicles, parts, training, communications equipment, satellite equipment, managerial overhead, and all the personnel to support these activities. Ford says that these smaller rural dealers will no longer be able to keep up with today's technologies and the expenditures that will be required by Ford. Expenditures that Ford says they will require the dealer to make in buildings, personnel, training, equipment, and technologies in the very near future. Ford has admitted that it is going to become very expensive to continue to be a Ford dealer.
How is Ford going to make it more expensive to stay a dealer? Answer: The Ford Blue Oval program and related certification requirements. Starting in April of 2001 there is going to be a lot of advertising about a new program at Ford called the Blue Oval program. Ford is going to roll this program out as essentially a customer satisfaction program. The large majority of Ford Select Dealers in America will disagree with this characterization of the Blue Oval program. On the dealer side of this program what Ford has done is to raise the invoice price of all 2001, and future, vehicles 1% without increasing the suggested retail price. This reduced the profit margins on all new vehicles by 1%. Now, you must understand that nationally new car sales operate on about a 3% margin, and for most Select Dealers this margin in 2000 was only 1%. To help offset this loss of profit potential, Ford then offered the dealers a bonus on every vehicle the dealer sold. However, the bonus was contingent on the dealers meeting certain criterion set by Ford. The problem with this type of structure is that only the Blue Oval certified dealers would be paid this bonus. And to qualify for the bonus the dealers were going to have to make significant expenditures. The dealers are now in rebellion since this kind of program, they feel, was not part of the original franchise agreement we all signed with Ford when we decided to make our multi-million dollar investments. Ford now ranks last in the National Automobile Dealers Association of dealer attitudes and dealer to manufacturer relations. The dealers see the Blue Oval program, as having established two prices for their vehicles. One price for certified dealers and a higher price for uncertified dealers. Having "two-tiered" pricing is against Federal law, which was established to protect the consumer and dealers alike. To date, over 25 lawsuits have been filed, or are in the process of being filed against Ford and the Blue Oval program.
Other increased costs that are jeopardizing your small rural dealers are the associated certification programs. The dealers service departments are primarily incurring these costs. Two years ago Ford outlined a stringent set of required technician certification criteria. If the dealer did not certify in all areas, to be rolled out in four phases, then Ford would refuse to pay for warranty work performed by the dealer. This type of approach is very detrimental to the consumer. If the dealer has to refuse to do a particular warranty repair, it is then up to the vehicle owner to find a dealer that is certified to do that repair. In the case of rural areas this can mean taking the vehicle into a neighboring town. Ford will not reimburse the owner for the expenses incurred in picking up their vehicles if it is located in another town. However, the dealer does have the option of subletting the vehicle repair to an independent shop for any and all repairs to be made under the warranty. This provision has the dealers fuming mad. We do not understand Ford's thinking that will not allow us to do the repair, at a much reduced labor rate, and yet Ford will pay full retail to a sublet repair facility that has neither Ford training or Ford equipment. This is seen as a severe penalty on its dealers and the owners of Ford products. The required period for completion of phase four training has now passed. There are many dealers not certified in all four phases. Most are still waiting for Ford to hold the training classes, and some rural dealers have been on the waiting list now for over a year. To add insult to injury, just as phase four training was to be completed Ford reduced payments to dealers for warranty repairs by 24%. Now the dealers are really mad, again. Ford has required an enormous amount of training, made it difficult to get the training, inconvenienced our customers enormously, and now is going to pay us less for the privilege of fixing factory defects. The dealers believe that Ford should pay our technicians and us a higher amount since they require "best in class" performance out of our employees and us. But since Ford saw fit to reduce payments the highly qualified technicians are leaving Ford dealerships in ever increasing numbers because they can no longer make a reasonable living. This has put a tremendous strain on dealer repair facilities. Technicians now have to work faster to make the same wage, and this is leading to increased faulty diagnoses and repairs, which further upsets the consumer and costs the dealers extra money to correct the mistakes.
When Henry Ford first founded his company almost 100 years ago he believed that it was important to have many dealers in rural America to sell and service his vehicles as people traveled around the country. The new heads at Ford Motor Company have decided that rural America no longer needs a Ford store in every town as Henry Ford first envisioned. If you live in rural America and you want to buy a Ford, you may now have to go to the next larger town. That means taking your tax dollars out of town and supporting someone else's schools, roads, sidewalks, parks, playgrounds, ball fields, fire support, police departments, and hospitals. If you live in rural America it now means that your Ford dealer is no longer your next-door neighbor. You will no longer see him/her at the store or doctor. The Ford dealer will no longer be there to make contributions to your high school prom, or booster club. You will no longer be able to call your local Ford dealer for a driver's education car, or to borrow a car for the Forth of July parade. And the metropolitan Ford owners will not be excluded either. We are a mobile nation, and while 75% live in and around the metro areas, all these owners will be traveling in rural America at some point. It will be a shame when they break down and the closest Ford dealer is nothing but an abandoned building. Ford Motor Company no longer finds this important. What Ford does think is important is the price of their stock and what foreign company they can buy next. So drive down to your local Ford store today and ask to see the owner. Ask him or her what they think of Ford's new image and the Ford Blue Oval program. But you better pack a lunch because you could be in for a very long, and educational, conversation.
----------
Whats everyone think?
Published: 03 April 2001
By: Dr. Randy Fuller
Source:
Updated:
Imagine you are in an auditorium full of 7,867 people. There is a handsome gray-haired man standing on the stage. He says to you, "Stand up and introduce yourself to the person in front of you, behind you, and then on both sides of you, and then please sit down." The gray-haired man then goes on to inform you that of the five people in your little group (this includes yourself, of course) one of you will not leave the room alive. If you were paying attention, you just realized that this kindly, handsome, gray-haired man just said that twenty percent of everyone in the room with you is a dead person. Well, that is exactly what Ford Motor Company is saying to their dealer body. That 1,200 of Ford's dealers are no longer welcome, and Ford would like them out of the business.
In reality, the numbers become even more ominous when you consider that the 1,200 dealers Ford is talking about come from the ranks of about 2,500 dealers. These 2,500 dealers are called Select Dealers and they account for about 31% of all dealers. A Select Dealer is a smaller, more rural dealer, versus the large metropolitan dealers that Ford calls the Contact Dealers. Drive around your town this weekend. Drive down to your local Ford dealer. If you live in rural America and this is the only franchised auto dealer in town, chances are this dealer is targeted for eventual elimination. If you live in a smaller town that also has a General Motors or Chrysler dealer in it, then chances are that your dealer will be spared for now. Why is Ford doing this? How is Ford doing this? These two questions are on the minds of every Select Ford Dealer in America right now.
Why is Ford trying to reduce the number of dealers? Very simply Ford believes that they have too many dealers. Ford believes that it is too expensive to provide the infrastructure to service the more rural dealers. Every dealer has to be supplied with vehicles, parts, training, communications equipment, satellite equipment, managerial overhead, and all the personnel to support these activities. Ford says that these smaller rural dealers will no longer be able to keep up with today's technologies and the expenditures that will be required by Ford. Expenditures that Ford says they will require the dealer to make in buildings, personnel, training, equipment, and technologies in the very near future. Ford has admitted that it is going to become very expensive to continue to be a Ford dealer.
How is Ford going to make it more expensive to stay a dealer? Answer: The Ford Blue Oval program and related certification requirements. Starting in April of 2001 there is going to be a lot of advertising about a new program at Ford called the Blue Oval program. Ford is going to roll this program out as essentially a customer satisfaction program. The large majority of Ford Select Dealers in America will disagree with this characterization of the Blue Oval program. On the dealer side of this program what Ford has done is to raise the invoice price of all 2001, and future, vehicles 1% without increasing the suggested retail price. This reduced the profit margins on all new vehicles by 1%. Now, you must understand that nationally new car sales operate on about a 3% margin, and for most Select Dealers this margin in 2000 was only 1%. To help offset this loss of profit potential, Ford then offered the dealers a bonus on every vehicle the dealer sold. However, the bonus was contingent on the dealers meeting certain criterion set by Ford. The problem with this type of structure is that only the Blue Oval certified dealers would be paid this bonus. And to qualify for the bonus the dealers were going to have to make significant expenditures. The dealers are now in rebellion since this kind of program, they feel, was not part of the original franchise agreement we all signed with Ford when we decided to make our multi-million dollar investments. Ford now ranks last in the National Automobile Dealers Association of dealer attitudes and dealer to manufacturer relations. The dealers see the Blue Oval program, as having established two prices for their vehicles. One price for certified dealers and a higher price for uncertified dealers. Having "two-tiered" pricing is against Federal law, which was established to protect the consumer and dealers alike. To date, over 25 lawsuits have been filed, or are in the process of being filed against Ford and the Blue Oval program.
Other increased costs that are jeopardizing your small rural dealers are the associated certification programs. The dealers service departments are primarily incurring these costs. Two years ago Ford outlined a stringent set of required technician certification criteria. If the dealer did not certify in all areas, to be rolled out in four phases, then Ford would refuse to pay for warranty work performed by the dealer. This type of approach is very detrimental to the consumer. If the dealer has to refuse to do a particular warranty repair, it is then up to the vehicle owner to find a dealer that is certified to do that repair. In the case of rural areas this can mean taking the vehicle into a neighboring town. Ford will not reimburse the owner for the expenses incurred in picking up their vehicles if it is located in another town. However, the dealer does have the option of subletting the vehicle repair to an independent shop for any and all repairs to be made under the warranty. This provision has the dealers fuming mad. We do not understand Ford's thinking that will not allow us to do the repair, at a much reduced labor rate, and yet Ford will pay full retail to a sublet repair facility that has neither Ford training or Ford equipment. This is seen as a severe penalty on its dealers and the owners of Ford products. The required period for completion of phase four training has now passed. There are many dealers not certified in all four phases. Most are still waiting for Ford to hold the training classes, and some rural dealers have been on the waiting list now for over a year. To add insult to injury, just as phase four training was to be completed Ford reduced payments to dealers for warranty repairs by 24%. Now the dealers are really mad, again. Ford has required an enormous amount of training, made it difficult to get the training, inconvenienced our customers enormously, and now is going to pay us less for the privilege of fixing factory defects. The dealers believe that Ford should pay our technicians and us a higher amount since they require "best in class" performance out of our employees and us. But since Ford saw fit to reduce payments the highly qualified technicians are leaving Ford dealerships in ever increasing numbers because they can no longer make a reasonable living. This has put a tremendous strain on dealer repair facilities. Technicians now have to work faster to make the same wage, and this is leading to increased faulty diagnoses and repairs, which further upsets the consumer and costs the dealers extra money to correct the mistakes.
When Henry Ford first founded his company almost 100 years ago he believed that it was important to have many dealers in rural America to sell and service his vehicles as people traveled around the country. The new heads at Ford Motor Company have decided that rural America no longer needs a Ford store in every town as Henry Ford first envisioned. If you live in rural America and you want to buy a Ford, you may now have to go to the next larger town. That means taking your tax dollars out of town and supporting someone else's schools, roads, sidewalks, parks, playgrounds, ball fields, fire support, police departments, and hospitals. If you live in rural America it now means that your Ford dealer is no longer your next-door neighbor. You will no longer see him/her at the store or doctor. The Ford dealer will no longer be there to make contributions to your high school prom, or booster club. You will no longer be able to call your local Ford dealer for a driver's education car, or to borrow a car for the Forth of July parade. And the metropolitan Ford owners will not be excluded either. We are a mobile nation, and while 75% live in and around the metro areas, all these owners will be traveling in rural America at some point. It will be a shame when they break down and the closest Ford dealer is nothing but an abandoned building. Ford Motor Company no longer finds this important. What Ford does think is important is the price of their stock and what foreign company they can buy next. So drive down to your local Ford store today and ask to see the owner. Ask him or her what they think of Ford's new image and the Ford Blue Oval program. But you better pack a lunch because you could be in for a very long, and educational, conversation.
----------
Whats everyone think?
