Ziegler Supersystems, Inc. January 2003  Dealer Mag Article

The Ambush at Fordstar Gulch

Bonus article by James A. Ziegler, CSP

Writing this on December 1^st to appear in the January issue of Dealer Magazine, it occurred to me I have some strong opinions to express about recent events, allegedly evil schemes and plots that are currently in motion emanating from Ford Motor Company. I didn’t want to dedicate most of my regular column writing about a single manufacturer so I asked Mike Roscoe to let me write two articles this month.

This article is not just another self-serving opportunity to say “I told you so!” even though I have told you so in almost every article written in this magazine over the last three years. (Archive past articles at www.ZieglerSuperSystems.com)

By now everyone is aware that Steve Lyons, Ford Division General Sales Manager, hosted a FordStar broadcast on November 14^th in which he retracted corporate promises made to dealers at the offset of the program which was launched April 13th of 2000.

Even though I knew it was coming, I was amazed at the gall, arrogance and corporate pomposity carefully wordsmithed into the announcement. Early in the broadcast, Lyons reminded the audience that... “I told you I would always be straightforward with you on this subject.” I will not go so far as to call Steve Lyons... “Steve Liar”...but I will say that according to my sources, it didn’t go down the way it was described in the broadcast. One thing I have learned through the years is to beware when a factory executive starts out reminding you that they are a “straight shooter”. That is a surefire indicator that a jar of Vaseline is hidden under the desk.

It all started back in August when some meetings with Ford executives and 15 Big Player Ford dealers in Chicago came up on my radar screen. I spoke about this and what they discussed when I performed the keynote speech for the Vermont Dealers Annual Meeting in September and again at the keynote speech I performed in October for the New Jersey Dealers’ NJ CAR Annual Meeting...and then again at The Hampton Roads Dealers Association annual meeting as well more than 10 Dealer 20-groups I spoke to since August. Truthfully, I have been deeply tuned in to every step and corporate move along the way through news sources I have cultivated very close to the situation in Dearborn.

Listening to Steve Lyons on video even as I write these words I am hearing the FordStar broadcast for the 50^th time playing on the television across the room here at home.

If you’ll recall about a week before the broadcast Bill Ford said in a press interview that he had found an additional $1 billion in short-term cost-cuts. Guess what? Now we know where he found it. Do the math...with savings to Ford based on current certified dealers staying certified, the savings to Ford will be close enough to round off at $1 billion over the next three year scale-down. Coupled with the fact that I am still predicting you are going to see a large number of certified dealers “decertified” for any number of suspect reasons.

In a masterful piece of factory propaganda, they have circulated “The Big Lie” that is reverberating around the industry and being sold to the press and to the dealers. The Big Lie is that the overwhelming majority of the dealers like the program. I speak to hundreds of dealers every month...many of the biggest Ford dealers in the country are personal friends of mine...but I also speak almost daily with “The Little Guys” who own the small dealerships. Most dealers have accepted the program as another treacherous factory initiative that they are forced to live with. The Blue Oval Certification money is now part of their business plan. Remember this...the factory reached into the dealer’s pockets and grabbed 1% of their money to fund this fiasco. For many it has now become the only way to remain profitable because the factory has unconscionably reduced profit margins to where their dealers can’t make a profit selling new Fords. The dealers were put in this position by the factory with certain promises announced by the dealer council at that time (2000) as well as in another FordStar videotape I just re-watched from back in 2000 where Jim O’Connor is assuring the dealers about the integrity and endurance of the program. He started out that broadcast assuring us that he was a “straight shooter” too.

I was on the phone the day before the broadcast with my friend Mark Truby at Detroit News telling him about what had just happened at the Ford Dealer Council meeting and about what Lyons was going to announce the next day on FordStar.

It was dirty and ugly...not the happy back-slapping, smiley-faced, warm and fuzzy Cleaver family images of factory/council relations Lyons seems to want us to believe occurred. Reportedly, members of the Dealer Council actually debated whether or not to pack up and go home in protest of the alleged heavy-handed tactics Ford was using. My sources tell me Steve Lyons approached the Dealer Council a few days before (their meeting started on Sunday, November 10^th) with a proposal to change Blue Oval Certified compensation. The original proposal was to pay certified dealers a flat $150 per unit sold. The dealer council fought hard against the idea even though Lyons was trying to sell it to them as a reduction of payment down to the equivalent of .625% ...of course the Council didn’t bite because a flat rate won’t increase as the price of cars goes up the way percentages would. The Council never agreed to the .625% but Steve Lyons said he had not discussed this proposal with his superiors and he would have to go check. (Smell a rat here? I do.) The Council circled the wagons and a lot of angry rhetoric flew. Now here where it gets hilarious...When Lyons returns to the Council he says that O’Connor and the others could not live with the .625% and they were firm at .50% and that’s the way it’s going to be...more or less. After dismissing all Factory Executives, the Council wrote a letter saying they would not endorse any changes to Blue Oval’s current format.

Allegedly, when seeing the council’s response, Lyons’ response was “Ford Division will do what we have to do!” and, from what I hear that’s where they left it and the FordStar broadcast took place a couple days later.

This is so weird...Steve and Jim put the Dealer Council on the “4-Square”.

Think about it? According to the story, Lyons comes in with a number but he’s got to get his manager to approve it. He peels the Dealers off of the ceiling, bounces them off of the walls, and then takes the alleged write-up to his manager who is out-of-sight, in another part of the building (O’Connor) who pencils it back. Is it just me or is this as bogus as it sounds?

Here’s the part that made my blood boil. From the beginning Lyons made a hard twice repeated statement... “Blue Oval’s not going away.”  In other words... (Ziegler interpretation) “We’re taking the money away but we still expect you to live with this worthless humiliating micro-management insult.”

He went on to say later... “Results are far too good to sunset the program.” As proof of this ridiculous pile of elephant crap, he pointed out the fact that Ford has improved 11 points in sales VOC (Voice of the Customer) and 13 points in service VOC since the program started. And he went on to say how proud he was that Ford is now 17^th in the J.D. Powers Sales Satisfaction alleged research. He then talked about Ford’s momentum in market share and how they had better J.D. Power scores than Chevrolet and Toyota. Of course the fact that J.D. Power is a private contractor with Ford paying them somewhere around $10 million per year couldn’t have anything to do with it...even if it does appear to be a gross conflict of interest and questionable ethics to me. Jim O’Connor said in a recent interview that he hasn’t heard anything negative about J.D. Powers and Associates from the dealers. Maybe some of you might drop Jim O’Connor a letter either praising or ridiculing J.D. Powers involvement/intrusion in your business.

Lyons also said that even though Ford was not selling any more cars because of CSI (actually they are selling a lot less)...the payoff was really about customer loyalty. Excuse me; I am just high school graduate from the Westside of Jacksonville BUT if it is about customer loyalty why have so many of Ford’s customers defected to other makes...isn’t that what loss of market share means? Could it be possible that Blue Evil Certified has contributed to a loss of market share because dealers are afraid of customers and J.D. Power and their employees are not closing the deals they used to close?

Lyons was adamant that the reason this needs to happen is because Ford lost more than $5 billion last year and will barely break even this year. He solemnly declared... “We will not even cover the cost of our capital. You’ve also seen our bond ratings and our credit adjusted three times this year.” He pointed out that most recently Ford’s credit rating was lowered from BBB+ to BBB. He said this affected Ford Credit’s ability to borrow...it has specifically gotten into our ability to lease cars and trucks.

Now here’s where what Steve said really pissed me off...and you should be pissed off about this too when you think about it. Lyons asks, “Why have we come under such pressure? Why did our profits of just a few years ago disappear so quickly?”  Lyons blames Ford’s problems on competitive pressure, i.e. Brand new players from Korea...luxury brands bringing out products competing with Ford...the highest marketing costs in history (0%, dealer cash, rebates) plus the high cost of leasing.

Several months ago I wrote the words... “God save us from the babblings of fools in denial.” They don’t even accept responsibility for their own incredibly inept management of the corporation. They are blaming the market. Now I am not comparing this company as a whole to the village idiots of the industry here...what I am asking is did you ever meet anyone who was too stupid to know they were stupid?

Excuse me... Firestone tires? Does that one ring-a-bell Steve? How about the fact that almost every new product launch for the last five years has blown up, burned up, failed or fell apart at the factory before the first units were shipped? Where’s that new Jaguar Steve? You know the one that was going to be in showrooms by December? (Steve is with Ford but it’s the same company) Did I miss something or has Ford recalled more cars than they built for nearly a decade? What about the fact that Ford has been at the very bottom in every reputable factory/dealer relationship survey and at least one disreputable one?  Your company blew billions on allegedly silly-ass technology sales and Internet initiative? Apparently under the Keystone Kops leadership (personal opinion based upon the magnitude of ineptitude as evidenced by the results and consequences) of Mssrs. Trotman and Nasser.  Oh yeah...Do you remember the mega-multi-millions Ford farted away with the Auto Collections back a couple of years ago when you guys (gals) were more overtly doubling-crossing your dealers and trying to compete directly? I can name another 100 ways Ford Motor Company pissed away a fortune that had nothing to do with market pressure.

In conclusion...I have warned dealers from the outset this was going to happen. I called it exactly the way it went down.  And, unfortunately it is still ongoing. When the rewards are gone, I predict they will be replaced with penalties. In other words, they will take something away from those dealers that do not qualify. It has already started...I have been getting letters and FedEx’s from dealers nationwide talking about how J.D. Power has decertified their dealerships over meaningless minute technicalities. One dealer wrote me that his dealership has glass sliding doors that customers were likely to walk into so he put a “Blue Oval Certified” Decal on these doors to protect his customers. According to the dealer, without warning J.D. Powers inspectors failed his dealership and decertified him over what I perceive to be a little piss ant technicality that they could have had the decency to say... “Hey pal, if you’ll scrape these off your windows, we’ll certify your store.” The reason they didn’t warn him? I wonder if they are on a mission to decertify some dealers. I have a premonition you’re going to see a lot of little piss ant technicalities popping up soon. It ain’t over til’ it’s over right? Be sure your techs and managers and others are certified. Many dealers learned a hard lesson here and that is they don’t play fair and they double-cross their friends right along with their enemies. Those of you who really tried to go along with it...you’re just as screwed as those who have been fighting for your rights from the beginning. It’s not too late to fight this thing.  They have been in some meetings with some high-powered dealers for nearly two weeks straight now. The final version of the changes will be out by the time you read this in January but I really don’t anticipate anything radical changing from what we’ve seen and heard here. This thing needs to go away completely and the margins need to be totally restored and Ford needs to apologize to the industry for putting us through this. Of course this is all my personal opinion...I could be wrong! (Not a chance)

Oh well enough for now...after all this is an extra bonus article, not my regular column. I can’t wait to hear Bill Ford’s keynote address at the NADA Convention about how to improve dealer-factory relations.

This Man Means Business!