Wednesday, September 13, 2006

Ford to shrink US dealer base over 3 yrs

According to a Reuters article published on Monday, Ford has plans to shrink its dealer base to adjust for its shrinking market share, or as the article puts it, to "align distribution better with its current market share."

One factor in this retraction of market share could be from Americans turning away from SUV’s and more towards fuel-efficient vehicles. In fact, many auto makers are releasing "Crossover" vehicles, a style of which Ford lacks. Another factor could also be our shopping trends. Consumers, especially car buyers, like to buy from people they trust and we also like selection. Ford dealerships tend to be many and smaller relative to other franchises such as Honda, Toyota, and Chevrolet. This forces consumers to shop around more for a Ford dealer they trust and that has good selection whereas fewer dealerships with larger inventories have already won half the battle.

But how will this affect the franchise owners? How will Ford select who to keep running and who to shut down? Likely it will come down to who you know for the Principals more than anything. Sales volume will have some influence, but if Ford takes away a large producer then most of that business will just migrate to the store that has been kept alive.



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