Car dealers often carry the financial consequences of decisions manufacturers make about model line, model distribution and model survival. Among the best examples of this is when General Motors Co. (NYSE: GM) shuttered Pontiac, Hummer, Oldsmobile and Saturn almost 15 years ago as the largest car company struggled to survive. Ford Motor Co. (NYSE: F) is in a related struggle, although not life-threatening. It will kill the Taurus, Fusion, C-Max and Fiesta. Some of its dealers will be left with only two car brands: the Mustang and new Focus Active.
Perhaps Ford thinks dealers will be happy with the sport utility vehicles they have left, which include the Expedition, Flex, Explorer and Edge, and the best-selling vehicle in the United States, the Ford F-150. However, dealers will have less foot traffic as consumers buy competitive products to the ones Ford has killed. Chevy, Honda Motor Co. Ltd. (NYSE: HMC) and Toyota Motor Corp. (NYSE: TM) will all get new dealer traffic. To add insult to injury, some of Ford’s disconnected models sell well and have brought dealers some degree of income, both from sales and service. Fusion sold 43,136 units in the first three months of this year. Fiesta sold 12,298. The discontinued models sold 65,000 units through the January to March period.
Undoubtedly, Ford’s math in sunsetting these models makes sense, unless gasoline prices rise above $4 as they did in 2008. It could be persuasively argued that will not happen again, but oil prices are rising, and geopolitical trouble and OPEC strategies could push prices higher. The average price of a gallon of regular gas is pushing toward $3.
Ford dealers have little choice in the matter. Some could add Japanese brands. It would be a way to bolster sales, and a sort of revenge against Ford. Likely they were not queried about the model discontinuations, which makes the decision insulting.
Ford could not expect to make its decision without fallout. In terms of dealer reaction, that fallout could be worse than expected.
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