Ford offers to Buy-out Minority Dealers - The rest of the story..

[XDCX]

Yesterday's headline that Ford was going to offer the 81 dealers in their Dealer Development Program an opportunity to cash-out surprised me. It seemed like a "pro-active" approach to helping some struggling dealers.

Today's story in the Detroit News provided the missing details.

Ford's Dealer Development Program had historically returned a dealer's capital investment if the dealership failed. It's like going to Las Vegas - if you win you get to keep your winnings but if you lose we'll give you your money back.

With yesterday's announcement, that guarantee goes away. The dealers have one last opportunity to cash out and get their investment back or they accept the risk that they lose their investment if the store fails.

Now I understand why Ford is making this offer.

Here's a link to the news report: http://www.detnews.com/apps/pbcs.dll...10348/1001/BIZ

[bruce350]

To me that is like saying, "we made a bad decision by offering you a dealership that you cannot manage, so here's your money back." Sort of like a marriage and divorce, but even though both said "I do", only Ford is the one saying "I'll pay." It is also a nice, neat way to thin the ranks of number of dealerships as well. Kill two birds with one stone.

[XDCX]

Originally Posted by bruce350

To me that is like saying, "we made a bad decision by offering you a dealership that you cannot manage, so here's your money back." Sort of like a marriage and divorce, but even though both said "I do", only Ford is the one saying "I'll pay." It is also a nice, neat way to thin the ranks of number of dealerships as well. Kill two birds with one stone.

I agree that it will thin the ranks - it will be interesting to see how many of the 81 take Ford's offer and walk away with their investment?

Before the story appeared in the press, I didn't know that Ford covered the losses of failed dealerships and returned the initial investment - that's a damn good deal if you're the dealer.

Losing money is never fun, but it's a lot easier when it's the factory's money.

[SHACOS]

I was surprised to hear Ford would recover the dealer's losses. Maybe that's why they lose so much money. The manufacturers need to start backing off giving tons of money to dealers and letting them stand on their own.

[XDCX]

Originally Posted by SHACOS

I was surprised to hear Ford would recover the dealer's losses. Maybe that's why they lose so much money. The manufacturers need to start backing off giving tons of money to dealers and letting them stand on their own.

I'd tend to agree, but I know that there has been a great deal of pressure on the OEMs to add minority dealers.

I remember in the late 1990s Chrysler had a policy of only awarding Open Points to minority dealers. Chrysler was red hot at that time, the Ram Truck, the Grand Cherokee and the Town and Country were flying off showroom floors and dealers were making tons of money.

There were established dealers with experience and capital that wanted to develop the Open Points but they were restricted because of the company policy. Sadly, many of those markets were never developed and now the real estate is too expensive to make sense for a Chrysler store.

It's a tough call, but I can't fault Ford for removing the portion of the program that returns the investment of a failed dealer - that program just seems to be too one-sided.