May 19, 2009 at 11:32 am

Ford rejects big cuts in dealer network

Dearborn -- Ford Motor Co. says it will not match big dealer cuts made by General Motors and Chrysler, and expects to benefit from the elimination of nearly 2,000 competing showrooms.

The company's director of North American sales, James D. Farley, said in an interview Monday that Ford had been pushing steadily to consolidate its dealers, rather than trying to end contracts or let them expire. Ford has reduced its dealer network by 700 since 2005, leaving it with 3,700 nationwide. Farley declined to specify Ford's targets for additional reductions but said they would be small compared with the cuts by GM and Chrysler.

Last week, Chrysler, which is in bankruptcy, said it would terminate nearly 800 dealers, or 25 percent of its total, by next month.

GM said it would cut 1,100 dealers next year in the first phase of a plan to reduce its dealers by 40 percent, to about 3,600 from 5,900.

Ford is not accepting any government bailout money, in contrast to its two crosstown rivals. It is taking every opportunity to highlight the difference, even as it searches for ways to match some of the cost-cutting structural changes at GM and Chrysler.

Farley was particularly critical of the Chrysler plan, noting how it would affect millions of consumers with little warning.

"It seems very abrupt and unplanned," he said. "You don't orphan 4 million customers overnight without some fallout."

Some of those customers, primarily those in rural areas, will migrate to Ford dealerships, he said. "It really depends on how GM and Chrysler handle these orphan owners," he said. "If they don't give them a lot of attention, it will result in consumers going to other brands."

Chrysler has asked its bankruptcy judge to approve the immediate closing of its dealerships at a hearing in early June.

The company said it would try to help affected dealers sell their inventories, an estimated 44,000 vehicles, to surviving Chrysler dealers.

Farley said the way that was handled could affect the overall market for new cars in the short term.

"We are very concerned how they are going to handle those 44,000 units," he said. "It's like a liquidation sale now, and the biggest issue is whether they will cut prices to move the inventory."

He said Ford would not offer greater sales incentives to match any price reductions that may result from the sell-off of inventories at GM and Chrysler. GM and Chrysler have said that by reducing the number of dealerships, the surviving showrooms will sell more vehicles, make more money and be able to invest more in dealerships and service.

"We don't think it's productive to just get rid of rural dealers," Farley said. The cuts at GM and Chrysler were partly focused on smaller and rural dealers. Chrysler dealers are expected to protest the closings in bankruptcy court. GM has not completed plans for dealer reductions. It said last week that it was simply informing 1,100 of its dealers that their franchise agreements would not be renewed next year, and that further decisions on the timing were several weeks away.

By then, GM could be following Chrysler into bankruptcy. The company is under a June 1 deadline set by President Barack Obama to restructure its operations and reduce its debt, or be forced into a bankruptcy filing.