An Open Letter to Jim Farley

Dear Mr. Farley,

Congratulations! Your interview at the Bernstein Strategic Decisions Conference has been shared on hundreds of media outlets. I agree, U.S. consumers will benefit from a modernized framework of purchasing new Ford vehicles. Consumers should have multiple paths of purchase including build-to-order and remote delivery options. I also agree that a one-price model facilitates a streamline, online buying process. Additionally, I understand the need for Ford to innovate its production and distribution model to reduce costs and remain competitive.

However, as I read the transcript of your interview, you seemed to have missed the importance of on-the-ground feedback from your retail channel. Could it be that you are aware of recent dealer initiatives, but don't see local Ford dealers as a critical part of your future retail sales framework?

I hope your answers to my questions can clarify the future role of Ford retailers in the U.S.

100% Online Buying Is Available Now

In our current market, many Ford dealers offer 100% online buying with remote delivery that does not require a showroom visit. Some Ford dealers even offer one-price models and a 100% online buying experience, but that is not what the majority of consumers want.

Over 90% of consumers still choose to visit a local dealership to test drive a vehicle, evaluate their trade, and ask questions about which model/trim best suits their needs.

Your speech implies that consumers who purchase an EV will have less questions and concerns about their next purchase, so the assistance of a local dealer, prior to purchase, will not be needed. Do you really believe that?

Research by Accenture shows that consumers have many concerns about EV vehicles (i.e. anxiety), which they don't have with ICE vehicles, and need to be addressed. Who will do the heavy lifting on EV education in local communities?

Your view of the dealer in a modern sales process is fundamentally different than mine.

Many consumers like visiting local dealerships and comparing models yet, others will prefer to purchase 100% online. Digital retailing and real-time retailing has become popular with U.S. franchise dealers yet, the majority of consumers like to see the car they are buying before signing and driving. Consumer behavior does not change when they choose a Ford EV model over an ICE model.

Will You Address My Questions?

Your ideal scenario for EV models, where dealers hold little/no new car inventory (also known as an agency model), requires some serious follow-up questions:

1. When a new Ford franchise is granted, dealers are expected to build a massive multi-million dollar complex to showcase and stock new cars. In your consumer direct model, the need for a large showroom and facility would be reduced since they might only need to stock one example of each new model. Is Ford changing their building standards and facility requirements today to minimize the investments dealers need to make for new facilities or facility upgrades?
2. A 100% online model is an admirable goal; Tesla envy is commonplace. Consumers with upside-down trades or poor credit can rarely transact with a 100% online buying model that is offered today. They don't fit into clean, high credit profiles with positive equity. Who is going to work out these deals and trade values on a national Ford EV sales portal when no technology platform can do it today?
3. The Ford franchise dealer model depends on trades (used cars) that come in on new car purchases. Used car profits have traditionally been higher than new car margins and have kept dealers afloat, especially when new car inventory is limited. In your consumer-direct model, where Ford sets an online trade-in value, who is purchasing the vehicle and where does it go?
4. Will Ford be selling certified pre-owned EV models direct to consumers on your national portal?
5. If you believe in a build-to-order model, what is your risk tolerance when other OEMs have local dealer lots filled with ready-to-buy competing models and you start to lose market share? Consumers in the U.S. are not like their EU counterparts who are used to waiting for a vehicle to be built.
6. Selling EV vehicles at a fixed price is not a problem, as long as consumers find value in Ford EV vehicles and want to buy them. What happens when Ford models (and likely incentives) do not sell through national inventory that you pre-built or orders fail to meet your production goals?
7. Dealers make the majority of their profit from new car sales by arranging financing and selling F&I products. In your new consumer-direct model, will local dealers have the ability to offer their own financing and F&I products, or will Ford control those offerings?
8. Have you calculated the anticipated profit margins for dealers in your consumer direct model? Are you willing to share what the PVR in your model looks like compared to what dealers are realizing today?
9. Could the complexity of trims and optional packages in the Ford EV lineup challenge consumers' ability to confidently configure, build, and purchase a vehicle online? If you look at the model and option choices on a Ford Bronco its clearly more complex that ordering a Tesla.
10. Which technology company has been chosen to design and build your national sales portal?

I hope to receive a response to my questions in the coming days. I support a modern retailing framework that reduces costs and creates a better consumer experience. I believe many of your Ford franchise dealers are willing to change and have already made changes to multi-channel selling, however, your public EV strategy is missing critical information that your dealer network needs so they can plan and protect their multi-million-dollar investments in Ford facilities.

I also invite you to join me on stage at the 2022 Modern Retailing Conference, November 13-15th in Palm Beach, to discuss your dealer strategy with franchise dealers from all over the U.S.

Sincerely,

Brian Pasch