Farley on consequences for dealers marking up prices

[Gullwingdmc]

Good new for those frustrated by dealers charging over MSRP.

Jim Farley in the Q4 Earnings Call
“We have about 10% of our dealers last year in the supply-constrained environment that, we're charging above MSRP to our best of our knowledge. We have very good knowledge of who they are. And their future allocation of product will be directly impacted because of that policy. And we've seen really quick action by our team.”

https://seekingalpha.com/article/44...y-on-q4-2021-results-earnings-call-transcript

Sponsored

 

[Frankie]

10% on custom orders?

Because I'm pretty sure it's like 97% for vehicles that are on the lot.

 

[Avelli]

10% on custom orders?

Because I'm pretty sure it's like 97% for vehicles that are on the lot.

Ford wants to adopt a direct-to-consumer, build-to-sales model, but have to use dealers (mostly because of the archaic laws put on the books by dealership franchise lobbies). Since the dealers forced Ford's hand, Ford is pushing back- and publicly too, with a new and more modern business approach.

 

[Chudsaviet]

Good new for those frustrated by dealers charging over MSRP.

Jim Farley in the Q4 Earnings Call
“We have about 10% of our dealers last year in the supply-constrained environment that, we're charging above MSRP to our best of our knowledge. We have very good knowledge of who they are. And their future allocation of product will be directly impacted because of that policy. And we've seen really quick action by our team.”

https://seekingalpha.com/article/44...y-on-q4-2021-results-earnings-call-transcript

Its more like 90%.

 

[zhackwyatt]

Supply and demand. Bueller?

 

[scoopman]

Clearly he was talking about ordered cars -- not canceled orders.

 

[scoopman]

Actually, if you go to the link, the quote is potentially out of context. Farley appeared to have the 10% referring to dealers who are selling ICE cars. He clearly implied that the practice of marking up was far more prevalent with dealers for BEVs, and problematic for Ford. Full answer:

Thank you. I would say, the answer to your question for ICE and BEV would be slightly different. We have about 10% of our dealers last year in the supply-constrained environment that, we're charging above MSRP to our best of our knowledge. We have very good knowledge of who they are. And their future allocation of product will be directly impacted because of that policy. And we've seen really quick action by our team.

On the BEV side, this is quite an important topic, because the margins that we want to build to in BEV are going to be heavily dependent on a different go-to-market and customer experience. I won't go into any more than that, but this is a quite important lesson for us of the franchise system, and the way we will manage going forward. But I'm very optimistic now that our team has the intelligence in the market that we put an allocation trigger in for those dealers who choose to price that way. But it's inefficiency no doubt about it.

 

[Gullwingdmc]

Supply and demand. Bueller?

I’m sure they will be demanding when their supply gets cut off.

 

[Gullwingdmc]

Actually, if you go to the link, the quote is potentially out of context. Farley appeared to have the 10% referring to dealers who are selling ICE cars.

I didn’t think the quote only applied to EVs. I’m sure there is plenty of price gauging happening on the Bronco, ICE Mustang, and other models.

 

[Bigfeets]

He knows who the dealers are, what they're doing, and will come down hard on them. So he says.

 

[Draconfier]

Well, Ford might spin off their total EV business if those dealers aren't careful, and completely cut them out of the loop. Food for thought.

Ford May Create EV Spinoff Company As Part Of Reorganization
The automaker may add another $20 billion to its EV budget as it aims to follow Tesla's success.

Feb 02, 2022 at 9:26am ET
By: Steven Loveday
Some folks in the EV community said it was only a matter of time before some legacy automakers would realize that their current business model may not work for an EV future. In fact, several EV fans have suggested that companies like Ford, GM, Volkswagen, Hyundai, and others should pull their EV division out into new spinoff companies to appeal to investors.

Ford May Create EV Spinoff Company As Part Of Reorganization

 

[MyLittlePony2022]

The CEO's comments now are now being picked up on the news outlets. I remain a sceptic on how much Ford will do and how much the dealers will reduce their need to exercise capitalism to the fullest. Too bad they do not play the long game and work on customer satisfaction. A happy customer comes back for maintenance, repairs and new purchases. The short game gets one sale and then forces (by poor service) the customer to exercise the ultimate consumer weapon, take your business elsewhere. Of course, this assumes you live in a large metropolitan area that you have lots of dealership. The word of mouth from a dissatisfied customer harms them. Think if you tell 4, 5 or 10 people how poor the service was at the RippedMeOff Ford dealer. It is easier to keep a customer than get a new one.

From the news site The Drive:

We’ve all seen it happening, especially in the last two years. Dealerships are cashing in on popular vehicles and maximizing the supply and demand cycle with big markups. At Ford, CEO Jim Farley has made it clear that he is keeping tabs on shops going above and beyond what is “reasonable” and won’t hesitate to levy consequences in the form of reduced vehicle allocations, which includes the new F-150 Lightning.
Farley said during an earnings call this week that about 10% of the dealer network has been charging above MSRP, and he’s not thrilled. According to Gary Gastelu at Fox Business, Barclays analyst Brian Johnson estimated the value of the markups at $3.6 billion. For scale, Gastelu says, that’s about half the increased revenue per unit Ford reported for 2021.
"We have very good knowledge of who they are, and their future allocation of product will be directly impacted," Farley said during the call. In my mind, I'm picturing him delivering this message with a hard stare. If a dealership has a middle name, Farley is using it right now like a father calling out a kid who is about to get in trouble.

Nearly a month ago, Ford threatened to pull F-150 Lightning allocations from dealers showing their green-eyed monster side. While dealerships are scrabbling for top dollar and trying to get all they can, headquarters made it clear they were not in favor of customers paying "additional deposits or payments" to dealers.

As The Drive reported in January, some Blue Oval dealers caught the attention of the boss late last year for putting their hands out in an unsavory way. Headlines popped up about dealerships offering Lightning reservation holders an opportunity to jump the line for thousands of dollars more, and that didn’t sit well with the boss. One dealership in Illinois even tried to sneak in a $10,000 markup on a Mach-e, and that shop got a quick smackdown from above.

"We’ve heard a limited number of dealerships are interacting with customers in a manner that is negatively impacting customer satisfaction," a Ford spokesperson confirmed to The Drive via email in January. "If Ford determines that a dealership is engaging in such practices, we reserve the right to redirect that dealership’s allocation of the F-150 Lightning for the entirety of the 2022 model year."

Ford isn’t alone in its watchdog approach; the Detroit Free Press reported that General Motors is also cracking down on markups. Between the chip shortage, supply chain disruptions, and overall imbalance due to the events of the past two years, automakers are keeping a close watch on how customers are reacting.

Negative press in the form of dealerships overeager to make a buck is going to be scrutinized. And while some say dealerships have the right to run their businesses they way they want, they still have to play by the rules set by the manufacturer. In the current market, toeing the line for the long-term health of the brand seems to be where Farley is focused. From a consumer perspective, I'm glad to hear it.

 

[BMT1071]

You know the old saying. You can shear a sheep many times but you can only slaughter it once.

 

[SnBGC]

Well, Ford might spin off their total EV business if those dealers aren't careful, and completely cut them out of the loop. Food for thought.

Ford May Create EV Spinoff Company As Part Of Reorganization
The automaker may add another $20 billion to its EV budget as it aims to follow Tesla's success.

Feb 02, 2022 at 9:26am ET
By: Steven Loveday
Some folks in the EV community said it was only a matter of time before some legacy automakers would realize that their current business model may not work for an EV future. In fact, several EV fans have suggested that companies like Ford, GM, Volkswagen, Hyundai, and others should pull their EV division out into new spinoff companies to appeal to investors.

Ford May Create EV Spinoff Company As Part Of Reorganization

If Volvo can do it with Polestar then others can do the same. Polestar also qualified for their own federal incentive allocation separate from Volvo so that was a win-win for them.