Is ‘voluntary redundancy’ the right route for Ford’s network?

  16 February 2020

Ford showroom

Ford’s plans to cut almost half its retailer network over the next four years is not surprising.

Today, Ford has 400 franchise points. The next nearest brand in terms of outlets is Vauxhall which is nearly at the end of its own network cuts that should leave it with a network of 260 showrooms. If you look at new car sales, Volkswagen is the next nearest brand. It’s a brand that’s also going through a network reorganisation and current has 185 dealerships.

On top of this lesson in coverage, Ford has seen new car sales fall steadily over the past few years. While it may still be the largest brand in the UK, the fall means the Ford car parc has been dropping too; reducing the number of cars that need to be serviced. The upshot is an average network return on sales that’s gone from 1.3% in 2016 to 0.4% last year.

In 2019, Ford sold 590 new cars per dealership. That compares to 1,081 new cars per VW franchise.

Everyone would agree, Ford’s fall needs arresting.

What’s surprising is that the Blue Oval is not doing it in one fell swoop – issuing termination notices to all, and renewing with the ones it wants to keep. Instead, it’s is going down the route of ‘voluntary redundancy’ for its second tier of satellite franchises. Ford boss Andy Barratt is banking on enough of these small, often family-owned, more rural sites wanting to take a package of perhaps becoming an approved-repairer or used-car specialist or just selling their freehold site and retiring.

While this may be a kinder process it is likely to be a slower process as individual businesses negotiate their exit one at a time. Result: the turnaround will be slower.

I’d also wager that we’ll get a couple of years into the four-year plan and the reduction won’t be going fast enough so terminations will follow.

No one likes to see businesses disappear, but if Ford doesn’t turn things around soon, a larger part of the network will suffer.

Better to have a strong and profitable network of 220 franchises as soon as possible, rather than wait four years for results.

 

Tristan Young

Editorial Director

Auto Retail Network

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