Ford to address dealer concerns about separating EV and legacy business

Ford CEO Jim Farley poses with a Ford F-150 Lightning pickup truck in Dearborn, Michigan, May 19, 2021.

Rebecca Cook | Reuters

Ford Motor dealer Marc McEver was surprised when he heard about the automaker’s plans to separate electric vehicles and its legacy business as part of a restructuring under CEO Jim Farley.

The owner of an Olathe Ford Lincoln near Kansas City, Kansas, heard the news at about 6:30 a.m. CST last Wednesday and “phoned Detroit” within 15 minutes to try to understand what was happening.

“When it was first announced, I was quite disappointed,” McEver said. “I panicked before I even shaved that day.”

But after speaking with Ford officials since then, McEver, whose dealership specializes in commercial and fleet vehicles, is now excited about the plan.

“After talking to a few people at Ford, I feel a lot better,” he said. “This whole thing is pretty clever.”

Soothing concerns from dealers like McEver are expected to be important to Ford executives Saturday during the company’s franchise dealer meeting at the National Auto Dealers Association Show in Las Vegas. The event annually attracts thousands of franchised dealers, including many of Ford’s approximately 3,100 retailers.

Farley caused waves on Wall Street and the auto industry last week when he announced the split plan. He called them “one of the biggest changes” in the company’s more than century-old history, including dealers “specializing” in certain vehicles.

Farley said some dealers like McEver might specialize in fleet vehicles, while others only do electric vehicles or sales to retail customers.

“We’re going to bet on a dealer franchise system,” Farley said. “That’s a different bet than what I’ve heard from other people. But we’ll do it by asking them to specialize.”

‘Better than Tesla’?

Farley’s plans add significant pressure and change to franchise dealers, which many Wall Street analysts see as a negative for legacy automakers like Ford when it comes to EVs. They argue that the system eats into the vehicle’s profits and can provide a more inconsistent experience compared to EV start-ups and Tesla, who own their stores and sell directly to consumers.

Those looking to sell EVs may have to operate in completely new ways, including online ordering, a commitment not to carry any inventory, and selling at non-negotiable transparent prices, as some dealers have taken advantage of or high demand and vehicle inventory. low to raise prices. price.

“In the next 60 days, we will be speaking with all of our dealers worldwide, and developing a standard list for new experiences that will be better than Tesla,” said Farley.

Ford and other legacy automakers are contractually obligated to sell through franchised dealers. Many states also have laws that prohibit the direct sale of vehicles by automakers to consumers.

Franchise dealers for decades have struggled to maintain traditional sales systems. Traditional automakers view dealerships as very important partners when it comes to vehicle servicing and community engagement.

Big meeting

Ford will seek to address any and all concerns about the plans announced at Saturday’s NADA meeting, spokeswoman Debra Hotaling said.

“That’s why we did this. We worked really hard to talk to our dealers and listen to them,” he said, repeating Farley’s comments about working with his dealers on this plan.

The change could cost dealers millions of dollars in upgrades depending on their size. They can also force some individual dealers to sell to larger companies, sometimes public companies such as AutoNation and Lithia Motors.

Consolidation of dealer networks has been a major trend in recent years amid difficult times during the coronavirus pandemic and automakers are pushing dealers to invest more in EVs.

Ryan LaFontaine, CEO and co-owner of LaFontaine Automotive Group in Michigan, said he was happy with the EV, but would like to know some additional details about Ford’s plans and requirements.

“It’s a big change, but it’s going to be something we embrace and we’re excited about,” he said. “It makes sense, but we’re still waiting as dealers to understand the full impact.”

LaFontaine says his company, which has three Ford dealerships and 26 other stores in Michigan, is “all round” when it comes to EVs.

The company, which sold nearly 44,000 vehicles last year, has invested nearly $1 million in the transition to EVs. Its franchises range from Detroit automakers and Toyota to Volvo-backed EV start-up Polestar.

“It’s an all-in game. All manufacturers are pretty much taking their entire portfolios, whether it’s today or in the near future, to become EVs,” he said. “If you don’t adapt, what you’re really doing is saying you’re not going to move forward with Ford or believe in the vision they have. Not just Ford, all manufacturers.”

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