From A Dealers Perspective - Local Manufacturing and Ford Autralia.

[janddbone]

Jonathan Barrett

On December 12, 2011, Ford Australia president Robert “Bob” Graziano signed a letter to congratulate the owner of a historic rural Ford dealer on his retirement from the trade.

“Congratulations on your dealership’s achievements over the last 86 years of Ford representation,” the letter read.

The correspondence was both intriguing and telling.

It was intriguing because the recipient, veteran Ford dealer Martin van Koldenhoven, hadn’t retired.

It was telling because it offered an insight into what went wrong with Ford’s *Australian arm.

Located 300 kilometres south-east of Perth, the now defunct Katanning dealership sold its first Ford in 1914. Van Koldenhoven bought the franchise in 1979 and sold between 10 and 15 new Fords each month, with many cars sold to third or even fourth-generation Ford families in rural WA.

“When you go through it you find a repeat of customers; farming families who have bought cars from us for generations,” says van Koldenhoven, looking over his log books from the 1980s and 90s from his office in Katanning.

But in recent years sales have dwindled. “Towards the end? One, two, three, four vehicles a month,” he says.
Complex causes

The causes of the closure of the dealership are complex.

Plenty of small businesses in the *drought-affected WA wheat belt are *struggling, with some areas recording falling population figures.

Moreover, rural dealerships often sell the large Falcons, manufactured in Melbourne, which consumers have shunned and which struggle to compete on price with imported models.

Many Ford dealers in metro areas have benefited from focusing on imported smaller models such as the Focus and Fiesta.

Yet one of van Koldenhoven’s complaints is that the response by Ford’s local arm to an Australian marketplace no longer buying its locally manufactured cars, was to tell its dealers to tidy up their showrooms.

In 2002, Ford started an initiative called Brand@Retail that required dealers to spend considerable sums upgrading their premises in the hope this would improve sales. The program was supposed to be *completed by the end of 2007, although about one in five dealers could not, or would not, comply. Van Koldenhoven was one of the dissenters.

Ford offered to share some of the costs, such as signage, while other items were solely in the remit of the dealerships.

At one stage van Koldenhoven offered to spend about $20,000 improving his facilities – which he believed to be already satisfactory – although that offer was rejected as inadequate.

By 2010, he calculated that he would have to spend $100,000 to meet the Brand@Retail requirements.

There were the required: granito *pumice stone tiles; the European beech top, single chrome and five-spoke chrome base café table; the Venice chairs, and moulded European beech seat with chrome frame.

The Katanning dealership, purpose-built with exposed brick to avoid painting and *re-painting,had to be covered with Gyprock.

It is not unusual for car makers to require their franchisees to invest in upgrades of their retail premises but van Koldenhoven, an accountant by training, knew he would never make back the money he was being told to put in, especially after the country-wide sales of the much-vaunted Ford Territory failed to stem the car company’s falling market share.
$20,000 of upgrades not enough

A Ford representative told van Koldenhoven in November 2010 – just over a year before the Graziano letter – that $20,000 worth of upgrades would not suffice.

“If, as per your verbal advice to me, the amount of money you will allocate to this exercise is $20,000 only, under present *circumstances, we find it difficult to understand how this matter can be resolved,” the Ford representative said.

There are those who strongly supported the initiative.

Victory Ford proprietor Victor Lapardin, in South Tweed Heads in NSW’s north-east, says it is important that all Ford dealerships look highly professional.

“Customers are demanding a more presentable business,” Lapardin says.

“No customer would accept a garage-style showroom.”

A Ford spokeswoman says, “Brand@Retail and all other investments Ford and our dealers make in our business are about investing in the future and *ensuring that customers can shop for **Ford vehicles in a stylish, professional *environment.”

She says 95 per cent of dealers now *comply with the initiative.

When van Koldenhoven refused to *comply, the Ford representative raised the idea of the Katanning dealership turning into a parts and service centre.

In short, he could lose his licence to sell Fords.

“Did I inflame the situation?” says van Koldenhoven, who concedes he is not one to back down from a fight. “Probably.”

“But this is the problem. Ford focused too much on the brand image and forgot about the product.”

A standoff ensued between van Koldenhoven and Ford Australia’s headquarters.

Lapardin says the end of Ford’s local *manufacturing will not affect him since there was little demand for the six-cylinder vehicles built locally anyway.

He says there is good demand for imported Fords, such as the Fiesta and the Kuga.

The trend is clear. Sales data from the *Federal Chamber of Automotive Industries shows that small passenger and light commercial vehicles dominate new car sales. Few are locally produced.

Meanwhile, those who like their cars big are buying SUVs.

In May, the Toyota Corolla and Hilux, Mazda 3, Holden Cruze and Hyundai i30 dominated sales.
Ford in sixth spot

Ford is in sixth spot in overall new car sales so far this year with a 7.7 percent *market share. But only a third are locally manufactured.

Consumers have switched to smaller, more fuel-efficient cars due to environ*mental concerns and rising petrol prices.

“This proved to be an issue for domestic manufacturers, particularly for Holden and Ford, as their core product range consists of large, powerful, fuel-inefficient vehicles,” says IBISWorld analyst Kosta Lev.

A strengthening Australian dollar also made imported cars cheaper.

When Ford shuts its manufacturing *operation in 2016, as scheduled, Holden and Toyota will be the only car outfits building automobiles in Australia.

Ford’s loss could be Holden’s gain. Adrian Edwards, who sells Holdens (and now *Mazdas) at his regional WA dealerships, says there is still a niche market for big cars, especially in the regions, and Holden hopes the Commodore will retrieve some market share.

But he says regional dealers struggle to compete with the city dealers as margins are squeezed and service centres require expensive, computerised, diagnostic tools.

“As time went on, it became harder to be the small dealer,” Edwards says.

“City dealers can do skinny deals due to their higher volumes.”

Katanning resident Vlada Jankovic owns a premium Ford Performance Vehicle GT and says it’s a hassle to drive three hours to Perth to find a Ford specialist he is *comfortable with.

“Ford mechanics work with Fords all the time so you feel confident in letting them do it,” says the 35-year-old. “I’d definitely *hesitate to take it to a *backyard mechanic.”
No loyalty

He says he comes from a Ford family but doubts whether that generational loyalty has a future in regions where there is no longer a dedicated Ford dealer and mechanic.

“My friends all had Commodores, but you have to do something different,” he says, as proof of his love of the brand.

As Ford’s market share dwindled, the company continued to pressure dealers into improving the aesthetics of their business.

In fact, a Ford sales subcommittee found that the branding initiative hadn’t had the desired effect. Many dealers who had spent considerable sums on upgrading their premises were in a weaker financial position than those who had refused.

“Dealers that have invested and have completed the Brand@Retail, are at a real disadvantage when compared to those that have not invested,” the subcommittee found, say the August 2010 minutes of the meeting.

The head office continued to pressure dealers to improve the look of their premises.

Tensions between van Koldenhoven and Ford boiled over in 2011. In a good month, the Katanning dealership would sell five new vehicles. It needed to sell 50 in a year to break even. Margins were paper-thin.

“I would have kept going, except for the pressure of spending money on Brand@Retail. I couldn’t see that I’d get a return,” says van Koldenhoven. “When the crunch came I said ‘no’.”

On November 7, 2011, van Koldenhoven sent the following message to Ford: “I gather from the tone of your correspondence that I should now be formulating an exit strategy and to that effect I suggest you delete vehicles from my status that have not been delivered and cease any further allocations.”

The wording of the letter was enough for Ford headquarters to rid itself of the dissident dealer, and close down a store that had serviced the area for 86 years.

And so, on December 12, 2011, Ford *Australia president Robert “Bob” Graziano signed a letter to congratulate the owner of a historic rural Ford dealer on his retirement from the trade.

The Australian Financial Review

[P6LTD351]

Wow! What an interesting read.

[Trevor 57]

A nice way to support a long time Ford dealer - NOT!!!

With things like this going on is it any wonder they have gone down the **** shute?

[Burnout]

Yep, there is so much in the above, should be interesting to see some comments.
A couple ago I went up to Dorrigo, NSW a genuine country town, The Ford Dealer was in a very samll old shop front of early 20th centruy style, a one man operation. They had on display a Fiesta with a sold sign on it and a 1930's Harley & Side Car. There were two small offices on the side and a small parts area out the back.
Just acroos the road on a corner was the original dealership office, empty and almost deserted except part of it was a real estate joint. Bloke reckoned he sold about 30-50 a year....

[FNQracing]

My daily commute takes me past just about every brand dealership there is, some more than once. I used to pass 3 Ford dealerships. There is now only 1 and it looks like its about to go as well. They recently started selling Kia's and the Ford section is "round the back".

[Paull]

This is somewhat analagous to the "content over format" arguement. That is, from an engineering point of view, it is the content that matters whereas from a pillow fluffing perspective, it is how it looks is more important as compared to the content.

Granted, we are only seeing a part of the whole picture/argument (why Ford has gone belly up), but this story shows a very interesting insight as to how management can only see the short term. Quite ironic that they finally figured out that the whole exercise has done more damage to the dealers than what was initially intended - oooops got that wrong!

On the reverse, I can certainly understand the requirement for having professional premises: pity they didn't look a bit deeper or, is this what Ford wanted - getting rid of smaller .ow turn-over sealerships???

[flappist]

This is indicative of a more bread mentality that is poisoning the whole of Australia.

There are far too many who cannot understand that the whole country is not made up of lots of smaller "capital cities" and that the entire population is not made up of "city people" who are forced to live outside the cities.

When I go shopping for ANYTHING I look for quality goods and do not care about the premises.

But then again, selling rubbish instead of food and just having a shiny plastic shop to convince idiots they are buying quality seems to have worked quite well for a certain Scottish slop house chain.......

[Magna]

very interesting article, i've said to a number of larger flashier looking ford dealers that they don't get that big and glitzy by giving customers a good deal, especially when they can't match the smaller dealers. i now understand why they have to charge more.

[pottery beige]

lols bang on Flap.. the masses are easily amused....

[Ibanezteve]

I feel like a Big Mac!

[FGII-XR6]

I can see the point in wanting to present a more professional front in high volume metro dealers but small rural dealers should have had much lower standards for their dealership building.
they should still look like a business premises not a garage or servo but by the same token most rural people don't expect flash building as the understand times are tough for the man on the land

[loony888]

I've worked for a multi franchise dealership in a town outside a capital city, i've been a customer of various franchises for plenty of different products and feel no pity for any of them.
When things are going their way they happily make their margins, as times get tough and margins get smaller, many, to varying degrees, devise ways of extracting extra dollars from customers with products and services they neither need or want under the guise of "customer service".

It's fair to say the owners of dealerships have entered into an agreement as a franchisee under Ford to make money, nothing wrong with that, but they agreed to the terms of their agreement and like any entrepreneur venture there are risks, those that take the leap win or lose, and often live the high life for as long as the ride lasts, those that play it safe are saddled to a 9 to 5 job taking 25 years to pay off a home and occasionally buy a new/near new car living an every day existence, also by choice.

the "australian financial review" article is obviously slanted towards the capitalist entrepreneur who make up the bulk of their readers no doubt and many will be crying foul as they read over their morning latte' but i for one, who is not an AFR reader could care less about the risk/return ratio of fords enforced revamp on a franchisee who has agreed to represent the ford product as they are instructed.

harsh? cynical? yep, probably, but at the end of the day if he had the customers none of this would be an issue, and why doesn't he have the customers? many reasons i suspect but one thing is for sure, they (we) all have problems of our own to worry about.

[FPV GTHO]

You see this with any number of franchises operations. Competition demands a contemporary image but the squeeze gets put on the family owners. I used to work for a local pizza franchise that had the major franchise bought out. The new shop front was estimated somewhere around $60k done to their recommendations. Within 2 years there was an updated corporate look, and new estimations of $60k to update again.

[jpd80]

And I could just imagine how well McDonalds burgers would sell if Mcds decided to not advertise properly for ten years or so..

The arguments would flow that the market has moved on to Thai and Korean products....

[GT-spec15]

Interesting read.

What's right for Jefferson Ford might not be right for a comparatively tiny rural operation.

[PG2]

Just for everyone's info, there is different levels of how a dealership is to fit out their premises.

It is different, cost wise, depending on what type of dealer (regional, rural etc) you are and how many cars Ford expect you to sell. I don't know the costs involved so I can't comment.

Whether I agree or disagree, but from what I have read from the above article, it was the dealer principal that pulled the trigger of pulling out, not Ford. Sure, it may have been in response to Ford's attitude etc but Ford did not pull the franchise from him.

[NGN 351]

What Brett forgot to mention is the boxes of special tools that would roll up, almost unannounced with an invoice from FoMoCo. The cost was nothing short of highway robbery and as a dealer you were just expected to pay, no questions asked. My father was a dealer in rural WA for over 30 years so i can talk from experience. You had the same costs as metro dealers at times but no where near the numbers passing through your dealership to try and cover these costs. Some special tools you knew you would almost never use as those cars wouldn't sell in your market. What was even more frustrating was the fact you could buy these tools elsewhere for a fraction of the price.
We were one of the last Subaru dealers (only one remains now) in country WA and subaru wanted a seperate showrooms just for their product and certain tiles, carpets etc etc.
For a dealer selling only 6-8 Subaru a month we couldn't justify it so after 25 years as a loyal dealer we handed back the franchise. The only other dealer to do the upgrade and keep the franchise wished he had never done it and would certainly not do it again.
Yes i am all for having a presentable showroom and facilities however this is not the most important thing for country folk, they would want to be able to trust the dealer first and foremost. I forget the number of vehicles and farm machinery i sold on a handshake and nothing more until delivery, you cant do that in Perth!
We built a brand new dealership 15 odd years ago, every single manufacturer we represented were full of praise in the standard of dealership we built but for some it didn't suit the corporate image and so we parted ways.
Some of the brand signage cost was nothing short of exorbitant which frustrated dealers, city and country alike. It was nothing short of a rip off, and the manufacturers wonder why relationships become strained. Decisions on dealership expenses were being made by company representatives, most of whom had never run a business in their life or understood costs or market pressures but they were sure happy to tell you how your dealership should look and how much it was going to cost. We made manufacturers "sales targets" most of the time but would try and tell us we still weren't selling enough. I still laugh at one of our sales guys telling one Ford rep "listen here son, i was selling cars long before you were in short pants, so don't try and tell me". That moment was golden, this "young"rep i reckon had never sold a thing in his life.
Its just a pity how some long standing dealers are treated after many years of loyalty to the brand.

[Gothefalcon]

I'm sure Henry Ford would be turning in his grave, if he heard stories such as this !
Sure... the dealerships need to be clean and presentable.... they need to reflect the sort of image of a company that cares about what it makes etc... but being the canny businesman he was... I'm sure he would understand that first & foremost, you have to actually have a representative of the company, if you want people to come and buy your products from them!

Country dealers are not "just another store in town" (as it can be in the cities)... they are people who make up a part of, what is usuallly, a close knit community ! If they are succesful, then they are undoubtably people who the other members of that community trust ! Country people, more often than not, will buy from the person they trust, the most, will look after them ! If the Coporate body (aka Ford, in this case) doesn't treat a particular Dealer well.... then this could also reflect in a great deal of that community not buying another Ford product (from anywhere), in support of them !

To me, this story smacks of a world where people are no longer required to do an "appenticeship" stage... where they are sent out to work amongst the different sectors of a business, so they can learn the differing requirements and get a true understanding of what will work, where and for whom... before they are put into possitions that require them to make decissions !

Dhru

[99AUXR]

Maybe they should have asked to dealerships to invest 100k in the falcon instead of their shops.. maybe we could have got more tech ffs

[b2tf]

I would have bought another FG but the dealership had the wrong floor tiles so I walked out.


Pu-leeeeeease....

[Charliewool]

It really makes you scratch your head and bloody wonder?
Wonder at the mentality of the twats sitting around the board table at Ford Aus HQ, coming up with tripe like this?
Fairdinkum... Heads shoulda rolled big time up where these ridiculous decisions were concocted!

[DanielXR8]

If Ford had been as insistent that all dealers gave a consistent high standard of sales and service and enforced those standards on the dealers, I for one would happily forgo the snappy presentation and they could just put a lick of paint on their 1960s showroom facade.

They might also still be building cars here post 2016, because they had enough repeat customers to warrant it.

[GREGL]

It's one of the reasons (which is brought up regularly) why you pay $x per hr for your service. So you can drink coffee and soak in the ambience. After all what else has a farmer got to do but sit around on his **** all day ! Dopey buggers really don't have much of a grasp on the bread and butter side of their market !

[Smoke Pursuit]

Lol I think there's something appealing about a small pretty much original dealership.... Sure upgrade the signage to match the brands current colours but covering up bricks with gyprock and changing floor tiles only takes away from the relevance of the dealership.

Wonder why Ford lets big multi-site dealers like Denmac Ford get away with this but puts the boot into the little man.....

[XW WA]

When I walk into a place that has way to much hollywood than it needs ,alarm bells start ringing . At then end of the day the customer pays
Sad story about the dealership , good on him for sticking to his guns tho

[strobe]

Hang on..I'm sure it's a good story, and I'm sure farmer brown doesn't give a rats about the tiling, but maybe he's presented with buying from a dealer which hasn't updated it's decor in 50 years or buying an abestos3000r from the new dealer in town with a cheaper price and new decor...brand loyalty isn't so loyal then.

[Crazy Dazz]

More clear evidence that FA simply lost the plot.
I have seen this “branding” crappola rolled out in several companies, and it is mostly just costly twaddle peddled by idiots in the Melbourne head office trying to justify their jobs.

Think about ALL your experiences with dealers, and what do you remember? What would motivate you to go back, to recommend, or not? The salesman, the service, and the deal.

[V8 Ghia Mike]

I remember being on a business trip and driving through a small town called Crystal Brook in northern country SA. I passed by the little Ford dealer there and saw my first BA Falcon in the workshop, fresh off the truck. I turned around, drove back and spent an hour chatting with the guys and looking over the car. That's what I want to see, great service, passion and KNOWLEDGE of the cars being sold.

The dealership looked like a little old service station or similar, had a few posters on the windows, a couple of dead flies on the window sills and even a tractor in the yard. But the enthusiasm those guys had for Ford's new hero car was unforgettable. I don't recall what sort of tiles they had on the floor, vinyl maybe?

Learn your lesson Ford, you ain't ever gonna be Mercedes or Porsche, so don't try and fool us with glitzy dealerships, clueless service centres and non-car loving salespeople with limited technical knowledge.

Mike