News: Analysis & Commentary: DETROIT
FORD BORROWS A BETTER IDEA
It plans to roll out new-car superstores nationwide
H Wayne Huizenga should be flattered by what the folks at Ford Motor Co. are engineering these days. Ford is imitating the automotive supermarket concept Huizenga launched two years ago with his AutoNation USA chain of used-car superstores. Ford's twist on a better idea: It's putting all its new cars--everything from a $10,000 Ford Escort to a $70,000 Jaguar--under one roof. To pull it off, the auto maker is spending hundreds of millions to buy stakes in existing dealers and merge them into superstores. Says Robert L. Rewey, Ford's group vice-president of marketing and sales: "We're paranoid we're not ahead."
Ford ought to be. Huizenga's AutoNation is well on its way to revolutionizing the way cars are sold in America. In two years, he has built the largest dealer conglomerate, and he has recently proclaimed his plan to build a $60 billion automotive empire within five years.IPO AHEAD? While General Motors Corp. and Chrysler Corp. have experimented with superstore selling, Ford is launching a major effort. Rewey just gave the new job of dealer consolidation and superstore creation to long-time Ford Div. Vice-President Ross Roberts, a straight-talking Texan who is popular with dealers. And on May 19, Ford finally persuaded reluctant dealers in Salt Lake City to cash in a dozen dealerships and plunge into the superstore business with the auto maker. Ford is establishing the same setup, dubbed the Ford Retail Network, in Tulsa and San Diego. Ford executives have told dealers that they plan to convert 10 markets to the new concept by year's end.
Rewey acknowledges he ripped a page from Huizenga's handbook. In the Ford superstores, car buyers have their pick of the auto maker's brands: Ford, Lincoln, Mercury, Mazda, and Jaguar. They can browse inventory on touch-screen computers and call on salaried sales staff, who are supposed to stop arm-twisting. Prices will be non-negotiable, but substantially below sticker prices since consolidation is expected to yield big cost savings. And for buyers who only want to pick up their car at the store, Ford has begun selling on the Internet.
None of this was an easy sell with dealers--despite Huizenga's inroads. When Ford made its first approach to dealers in Salt Lake City and Indianapolis, the carmaker was sent packing because dealers felt the buyout offers were too meager. What's more, dealers consider the suits in headquarters more adept in the boardroom than the showroom. "The manufacturers don't have a good retailing history and probably never will," says James Mulvaney, among 21 Indianapolis dealers who still reject Ford's idea.
Ford sweetened the pot in Salt Lake City by suggesting an initial public offering of the Ford Retail Network is possible down the road. Suddenly, Ford's buyout price didn't seem so bad. It would have been better two years ago--before Wall Street cooled to dealer IPOs after seeing how hard it is to cut dealer costs. Now, most dealer stocks are trading near 52-week lows.
Even if IPO riches remain a distant prospect, however, dealers and auto makers are realizing the worst strategy now is to do nothing. "If we don't remain flexible," says Salt Lake City Ford dealer Duff Willey, "we'll all be history." That's why more and more Ford dealers are willing to sell their showrooms to the company store.By Keith Naughton in Detroit