Ford to Allow Public Firms to Own Dealers
In a move that could speed restructuring of auto retailing, Ford Motor Co. on Friday dropped its opposition to the sale of new-car dealerships to publicly owned companies.
The decision relates specifically to Republic Industries, a company headed by billionaire entrepreneur Wayne Huizenga, but will be broadly applied to other qualified publicly owned companies that want to acquire Ford dealerships.
Ford said it had reached an agreement with Republic that will allow Republic’s AutoNation USA unit to purchase Ford and Lincoln-Mercury dealerships. AutoNation is building a nationwide chain of used-car superstores and plans acquisitions of new-car dealerships.
The deal comes as Republic is trying to acquire Magic Ford of Valencia, the nation’s fifth-largest Ford dealership, which filed for Chapter 11 bankruptcy protection in September. Five other concerns are bidding on the dealership.
Among the auto makers, Ford has been the most vocal against ownership of dealerships by publicly traded companies. The Dearborn, Mich.-based company argues that individual owners who have their own money at risk and have close community ties are preferable to larger, more impersonal operators.
Robert Rewey, vice president of sales, said Ford continues to believe private entrepreneurs will remain the backbone of the franchise system but also recognizes the vast changes occurring in the dealership system.
He said the evolution of dealership patterns and distribution methods can be accommodated as long as the public companies are willing to use local management with ties to the communities to operate the outlets.
“We are working diligently to ensure that the new operators fit into our franchise system,” Rewey said.
Auto retailing is a notoriously inefficient system and the car buying process is strongly disliked by many consumers. These factors have brought new players promising more efficient, consumer-friendly operations.
At the same time, the individual dealer is giving way to mega-dealer powerhouses that own dozens of showrooms.
Some dealer chains have recently filed initial public offerings. And retailers with experience in consumer sales are muscling in on new- and used-car operations.
Other auto makers already have shown themselves to be more accommodating to the publicly owned operators. For instance, Chrysler last year granted a new-car franchise to CarMax, a unit of Circuit City Stores.
Steve Berrard, president of Republic, expressed satisfaction with the Ford deal and said similar negotiations are underway with other auto makers. AutoNation is seeking new-car dealerships in large markets nationwide.
“We are actively pursuing opportunities in California,” Berrard said.
