Ford Motor Co.'s three-year experiment in owning a stake in its own retail dealerships has not worked out as expected, and the company has decided to sell its retail stores, including those in Utah operating under the name Utah Auto Collection.
Ford spokesman John Ochs said the company decided to sell the 30 stores it owns in three states after dealers not part of the company's controversial Auto Collection group of factory stores complained that it wasn't fair for them to have to compete with their own supplier.
The company has already agreed to sell seven of its dealerships in Tulsa, Okla., to United Auto Group, the nation's second-largest publicly held U.S. auto dealer. The other 23 in Utah, Oklahoma and New York will be sold as buyers are found.
A spokeswoman for Utah Auto Collection chief executive officer Duff Willey said Wednesday he would not comment on Ford's decision and was referring media calls to Ford headquarters in Dearborn, Mich.
The Utah Auto Collection currently has nine dealerships in Salt Lake City, Bountiful, West Valley City, Murray, American Fork and Orem, where it sells Ford, Lincoln, Mercury and Mazda cars and trucks (Ford owns a majority stake in Mazda), and a parts warehouse located in South Salt Lake.
Ochs said Ford decided to sell after company chief executive officer Jacques Nasser met with dealers who made it clear they were tired of competing with company-owned stores in Auto Collection markets.
He said the time frame for selling the Utah dealerships would be "over the next few months; the target is to sell by the end of the year."
The logical buyers would be the remaining partners in the Utah Auto Collection who own an interest along with Ford. The most recent available list of those partners included Willey, Robert Garff, Mike Day, Ray Noorda and Greg Middlekauf.
"I would think they would be offered the opportunity to buy back their dealerships," said Ochs, adding that Ford's goal is to "break up" the Utah Auto Collection, not sell it as a whole. He said the best way to think of the collection is as a business entity owned in part by Ford and in part by the local dealer partners.
As for whether the collection is worth buying, Ochs said there is no doubt about that. "The Utah Auto Collection is very profitable and, as you know, when you sell something that is making money, it makes it more attractive to potential buyers."
The Utah Auto Collection started in mid-1997 when 11 Wasatch Front auto dealerships announced they would merge into a single mega-dealership to be called the Ford Retail Network, or FRN. The dealers would remain part owners with Ford. The deal seemed to have flopped in the months after the announcement but was rejuvenated in May 1998.
By March 1999, the merger had grown to 13 Utah dealers, and the FRN name was changed to the Utah Auto Collection, after similar collaborations by Ford dealers in Tulsa and Oklahoma City, Rochester, N.Y., and San Diego.
The rationale for the deal was that Ford dealers' biggest competition came from other Ford dealers, and that by banding together, they could eliminate that competition and offer no-haggle pricing and unified service centers.
In October 1999 the concept developed major cracks when eight of the 13 dealers who initially bought into the concept opted to bail out and sell their stake to Ford.
But not all dealers jumped on the bandwagon at any point in the dealings. Jewell Lee Kenley of Ed Kenley Ford in Layton said earlier that she didn't think it would be good for her long-term customers. "Our prices are considerably lower" she said, adding that many people had come in to her store "frustrated by the one price they're given with the Auto Collection."
Similarly, Brent Butterfield of Butterfield Ford in Sandy decided to remain independent but had no love for the Auto Collection.
"Clearly, it created problems for us," Butterfield said at the time the eight dealers sold out. "My competitor is my supplier and vice versa. Which hat does Ford wear on which day?"
Neither Kenley nor Butterfield could be reached for comment by press deadlines Wednesday.
General Motors also had discussed creating auto collections because such consolidations were thought to be a way to cut costs — distribution costs amount to nearly a third of the cost of a car — and allow them to better control how their brands are sold. But GM dealers rose up in protest, and many states were found to have laws barring carmakers from owning dealerships, so its plans were scrapped.
Ford also cut way back on its original goal to set up collections in other cities but had tried to hang on to the ones it already owned.
Now, even that marginal effort is dead, and Ochs said the experiment puts an end to factory ownership of dealers. But he refuses to concede that the idea failed. "It didn't fail. It was and is profitable, and we learned a lot of things doing it. It was only due to adverse dealer reaction that the company decided to terminate its interest."
E-mail: max@desnews.com