Having just finished a wholesale with Ford, their restructuring is fresh on my mind. I cant speak for the GM dealers; but as a Ford dealer I'm seeing first hand that they have made some great progress on their turn around plan. It's no secret that historically dealers and manufacturers have had a rocky relationship, especially the domestics.
Even as long ago as the early 1900s the factory has shoved cars and expenses unnecessarily to the dealers. Like many economic trends it's cyclical, but with their recent market share slides, the domestic dealers have really taken a beating in the recent past. It is so frustrating going into wholesale meeting, facing your factory rep who has to force an insanely big days supply of cars on the dealership. Here we are, trying to tame our massive flooring expenses, increase our turn, decrease lot rot and they wanted to push unneeded cars on us. To make it worse, it generally was the stuff you didn't want. You know, the cars you couldn't even sell well at lower volumes. At least if they wanted to pile cars on us, dump on the vehicles that were in high demand; we may be overstocked but we at least had a big market to tap into. But no, it was never like that. Their answer was typically something about your commitment to the factory or "look at our new promotion coming out." I was always amazed at how well the factory rep could justify buying a 7 months supply of odd color Tauruses and hearing him explaining that by that act alone our sales will skyrocket. They did earn many creativity points in my book.
On the other side, you could never get the stuff you really needed. Aren't some commodity restrictions a joke! I mean, I get it from a manufacturing site and all, but do they not get how frustrating it is to be forced to take a 3 years supply of Crown Vic's and then be limited on the good stuff? Only 25% manual trans on the mustang GT, 40% crew cab mix, 1 hybrid for every 10 escapes and a host of other frustrating road blocks to getting the inventory right. Oh to be a Lexus dealer and not have Crown Vic inventory birthday parties. The end result: it has been difficult to maintain steady inventory levels at an appropriate days supply to manage the flooring. (I understand some import dealers have not had this issue nearly to the extent us domestic have dealt with and to that all I can say is be grateful for your brands.) In any case the past is behind us and I'm hear to report, from my view, those days are over and behind us. I just finished a wholesales meeting where virtually every line was held back and I was asking for more. The tables have completely turned, rather than fight to not take inventory, I'm looking for ways to get more. I even noticed that the calculation to figure our needs were at a REAL 60 day turn. That's a huge improvement to the past 60 day turn numbers they use to bring that when really calculated out figured to be a 120 days supply called a 60. WOW, the capacity has really been cut, and the benefits are going to be huge (much bigger than a change in wholesale). Obviously the change in wholesales is nice but the effects are going to be much farther reaching than that.
Off the cuff, we as dealers can get excited because we will have a much easier time managing our flooring account. We all know flooring is all about turn, and turn is directly connected with days supply. The key is keeping the right days supply for optimal turn ( I dont mean to get into a discussion about turn, days supply or any of that, just to say that we should have an easier time at managing this.) Next, because the supply of cars is so much less, we wont be forced to discount so deeply to sell. I dont think its right to say that we will not see this effect over night, nor do I think it will be as much a conscious decision, but naturally as supplies are kept lower because of production, values should rise. Gross should increase slightly but more importantly; I am super excited for leasing. I cant wait for the day that residuals are truly strong enough for Ford to be comfortable pushing them again. It is a shame that we have moved so far away from leasing. Again another topic for another time. Lastly, the restructuring plan will hit our used car business. Most notably our vehicles shouldn't depreciate in the same manner. The rate of depreciation should be slower, so our customers won't be so far upside down; although worse than the depreciation factor causing negative equity is us dealers placing customers in longer and longer term loans (another topic for another day).
All in all there are MAJOR changes taking place right now for the domestic stores and I have to seriously applaud Ford for their commitment and execution thus far of their restructuring plan. Already results have been very tangible. Personally, I see the brand increasing in value dramatically over the next 5-10 years. Its not an easy job, but they are making a difference. Great job and thank you Ford!