Ford and its dealers: Road repairs ahead
By David C. Smith Ward's Dealer Business, Mar 1, 2002 12:00 PM

“The ball is now in our court to improve quality, produce exciting products and earn their trust.”

That's how Jim Padilla, Ford Motor Co.'s new top North American executive, sizes up the challenge he faces in winning the hearts and minds of the Ford's 4,200 U.S. dealers, many of whom have been angry and vocal about how they've been treated lately.

Their number one gripe is what they perceive as Ford's high-handedness in creating policies detrimental to their operations. They also fault Ford for failing to listen to, and act upon, their concerns. And they're fed up with poor quality, new-model glitches and constant recalls, all having a huge impact on Ford's reputation — and theirs.

Bowing to criticism over its decision to purchase dealership groups in Tulsa, Salt Lake City, San Diego and Rochester during the late 1990s under the “U.S. Auto Collections” banner, Ford retreated last year, and has either sold its interests in those ventures or soon will.

Ford purchased the dealer groups to counter the rapid expansion of publicly owned outfits such as AutoNation Inc., which were gobbling up dealerships nationwide at the time.

“We thought we should control some of our dealer operations and use them as laboratories,” says a high-ranking Ford executive. “But we weren't very consistent in our communications. We sent out a lot of messages.”

“The venture also has proven costly,” he says. “Our performance was not too good, so our return hasn't been too good, either. We learned that we are wholesalers, so our goal is to develop the best vehicles at high quality while our dealers become the best retailers.”

But Ford has not backed down on its controversial “Blue Oval” program launched in April 2000 that rewards dealers who meet customer satisfaction goals set and monitored by the company, despite strong criticism by some dealers. Ford underscores that 95% of its Ford Div. dealers have been certified under Blue Oval.

Under Blue Oval, Ford sets operating standards designed to gauge customer satisfaction in sales, service, dealership personnel, technical capabilities and facilities, then monitors customer feedback. Dealers who meet the criteria qualify for a 1.25% discount on each vehicle purchased from Ford, or an average of $275 ($250 for cars, $290 for trucks).

Still, many dealers view Blue Oval as more meddling by Ford and remain adamantly opposed to the program.

“We participate because we have to in order to be competitive,” says Robert Wahlstrom of Wahlstrom Ford in Chadron, NE.

Others argue that Blue Oval clouds the issue of who's to blame for poor customer satisfaction, the factory or the dealer.

A Ford official acknowledges that Blue Oval has stirred resentment in some quarters — and fear that it'll stiffen standards — but he maintains it's necessary to get everyone focused on pleasing consumers.

Ford also argues that it has begun improving its longstanding low ratings in independent quality and durability surveys.

In the J.D. Power & Associates Vehicle Dependability Index (VDI) study released last November, Ford led the U.S. Big Three to place third, up from fourth in 2000, behind Toyota and Honda.

It also shot up above average in service dependability in the Power survey, finishing higher than General Motors Corp. and DaimlerChrysler.

That's some of the good news.

Padilla, however, knows he still has many fences to mend, and that starts with quality, his specialty. Communication is the main issue in Ford-dealer relationships, he says.

“Being on the same page is key,” says Padilla. “Dealers have their life savings in their businesses. We've admitted we've done some things that have caused problems, so we're getting out of operations that conflict with our dealers.”

Ford's famed oval cracked, but did not crumble, during 2001 as the seemingly star-crossed automaker weathered myriad setbacks. Now it's busy patching up the fissures and charting an extensive restructuring strategy revealed in mid-January and led by a new top management team.

As its outlook worsened, in late October last year President and CEO Jacques Nasser was shown the door. Mr. Nasser was a special target for the dealers' wrath. They claimed he treated them like second-class citizens, and seldom met with them face-to-face.

Chairman William Clay Ford Jr. added the CEO title, a move welcomed by dealers, who've always had warmer relationships with the Ford family. Nick Scheele, an outgoing Brit with people skills Mr. Nasser lacked, moved up to president. And Padilla, an amiable native Detroiter, took over as group vice president-North America manufacturing, product development, sales and marketing.

A 55-year-old with 35 years at Ford, Padilla has made his mark in manufacturing and engineering. During the 1990s, Scheele served as chairman of Jaguar Cars Ltd., which Ford acquired in 1989. Padilla was his man on the floor.

He installed the Ford Production System (FPS), patterned after Toyota's benchmark scheme, and engineered a quality metamorphosis that boosted Jaguar from the depths of the charts to world-class levels.

Can he repeat that success at Ford's North American plants? “Without a doubt,” he says. “We've already standardized at 65 plants. We're holding line managers accountable.” On a scale of 1-10, he says Ford's North American plants currently fall in the 7 to 8 range in terms of meeting quality targets.

Because many launch problems and recalls are traceable to defective supplier parts and components, Ford this month is launching a new initiative called Q12002, which he describes as “Q1 with teeth in it.”

In the past, after suppliers earned Q1 status — Ford's quality certification process — there was no follow-up, no need to renew.

Under Q12002, Ford will work continuously with suppliers to check their in-plant quality procedures and re-evaluate them twice yearly to make sure they are meeting Ford's expectations. They'll be more directly accountable for defects that cause plant stoppages or recalls, and they'll be responsible for snafus created by sub-suppliers, Padilla says.

Most importantly, Ford won't turn over core engineering to suppliers. “Our engineers have to ‘own’ the supplier base,” he says. Summed up, Ford plans to keep firm control over the processes that dictate the final quality of its cars and trucks, and is tightening internal controls as well. “We're already getting a lot of positive feedback from dealers on our quality initiatives,” he maintains.

Frankly admitting that, as one who has spent nearly all of his career on the manufacturing side, he still has much to learn about retailing, Padilla is teaming up with Scheele and other executives to focus on dealer concerns.

The Ford executive team, for example, recently met with 250 dealers in four cities where Padilla's message was “quality, quality, quality.”

Shortly after they assumed their new jobs, Scheele and Padilla invited the Ford Dealer Council to visit the company's Wayne (MI) plant, where the compact Focus is built, to observe first hand what the company is doing to improve product quality.

Bill Ford, a powerful symbol widely respected throughout the Ford empire, also joins the team as time permits. And behind the scenes his cousin, Edsel Ford II, who retired as president of Ford Motor Credit Co. in 1999 — also popular with dealers — has been working the circuit amid reports that he may rejoin the company in a sales/marketing post.

Ford also is taking its message on the road. James G. O'Connor, in charge of the Ford Div., says he met with 160 dealers in four cities and that Ford's top executives together traveled to nine cities.

That doesn't count his own rigorous schedule: 189 dinners and 104 days outside Michigan in the last year. In one plant tour, he recalls, dealers were shown how fixes were made to nettlesome problems such as filters prone to clogging and poor key fits on ignition switches.

O'Connor, once a dealership general manager, already sees improvement in the company's dealer relations. But he's candid about past transgressions.

“I view relations with dealers as a two-way street of trust and respect plus providing good quality products by the manufacturer. But trust is like a large tree. It takes a long time to grow, but you can chop it down overnight.”

O'Connor concedes that in retrospect, the Auto Collections strategy was flawed.

“It was a breach of trust; we snuck under the dealers' tents,” he says. “We saw our trust quickly drop. I think it will take time to rebuild, but it's already underway.”

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Dave Smith is editor-at-large of Ward's Dealer Business.