Ford isn't wasting any time bragging about their bought and paid for surveys claiming that their quality is now on par with Toyota's. However, as the Detroit News reveals, FoMoCo's newfound reliability has dealers losing money on warranty work. The National Automobile Dealers Association estimates Ford dealers currently lose $30 on every new car they sell; they make up the difference through financing, add-ons, service and warranty work. [U.S. car dealers earned $7.7b on warranty repairs last year.] With warranty work shrinking, they'll have to earn more money elsewhere. To that end, Ford's introducing a line of aftermarket accessories called "Customs" focusing (so to speak) on "high-profit items like custom wheels and electronics." So in addition to paint protection, window etching and LoJack, Ford dealers will be hawking factory-authorized customization. Pimp my profits?
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Frank: Would you have been “sold” on Ford’s new quality message if they backed it up with the Consumer Reports and JD Power data instead of the survey in question ? Not being flippant here—truly interested in your thoughts.
To the point of this article—-to those that think Ford’s improving quality (as communicated in survey form) is bunk—–follow the money trail to the dealership level. As the article states—warranty work performed by Ford dealers has decreased significantly over the past few years. This notion gets beyong the 90 day inital quality stuff and into a more substanative trend.
On the downside—-Ford better accelerate their product cadence (New Taurus + Focus)so dealers bottom line isn’t devastated more than it has been over the 5 years as Ford’s market share has eroded.
I just did a long road trip, and one thing I noticed in the small towns of the Western US is that in every one a big Ford dealer was very prominent. I bet that those dealers continue to make good profits and that their owners are pillars of the local Rotary, school team sponsors, etc. Those little towns rarely have any import dealerships of any kind and the roads are filled with Ford and GM products, but Ford seems to dominate.
The Ford dealers that have to be taking it in the shorts are the multiple dealers competing with each other in the major markets.
It is going to take a massive shakeout in the large markets to sort the problem out. Accessory sales are not going to save the day.
That said, Ford would be smart to take a page from Honda’s book and minimize the number of factory options while playing up the dealer installed options.
jthorner—great points.
The dealerships are already doing that without the blessing or help of Ford. I worked part time for a vehicle customizing shop and the dealers in this area were some of the primary customers. They order wheels, tires, running boards, ground effects, graphics, etc and sell them for a large mark (I mean a HUGE) up on a new car or truck.
I live in a suburb of a small city as mentioned above with a Ford dealer in it. While the area I live in does have a large number of Fords in it I’ve noticed that many of them are being replaced by Toyondas and Hyundai/Kias. The times are a changing.
If dealers are not making money on warranty work, that’s a good thing, no?
-You’re gonna want that Tru-coat ’cause you’ll have oxidation problems without it, I guarantee.
-You lied to me Mr Lundegaard…
I remember when “FORD” stood for “Found On Road, Dead.” They’ve got the reliability thing pretty well beat, I have to give them credit for that. The problem now is in product design and planning.
The accessories store is a good idea. One thing I love about the local VW dealer is all the stuff they have. It might take a while for Ford customers to warm up to the idea though as most Ford dealer service departments are frightening places that you don’t want to go to unless your car is on fire or possessed by demons.
davey49: well, after dealing with 2 VW’s…. I can assure you that the VW service dept is much scarier than my current Ford dealership who has been terrific
N85523 :
I’m LOL’ing at the Fargo reference.
What the hell kind of business model is it to make it only possible to give a profit to your major business partner by paying him (or her) to repair the faults in your product?!
Duly deleted!
umterp85
Frank: Would you have been “sold” on Ford’s new quality message if they backed it up with the Consumer Reports and JD Power data instead of the survey in question ? Not being flippant here—truly interested in your thoughts.
I’m not a big fan of any kind of survey where they don’t disclose the methodology, demographics or anything else but the results. The secrecy automatically makes the conspiracy theorist in me suspect they’re hiding something. However, the fact that warranty work has dropped off to the point the dealers are complaining about lost revenue is impressive. That’s what Ford should be advertising — how much warranty claims have dropped off due to quality improvements — not bragging about some survey result.
quasimondo
If dealers are not making money on warranty work, that’s a good thing, no?
Good for the customers and company. Bad for the dealers who have come to depend on warranty work to keep their service department running. They’ll continue to suffer until they can get sales back up and turning a profit.
KatiePuckrik
Something doesn’t make sense. How can Ford’s quality be going up yet Ford’s dealers (in the United States alone) did $7.7 billion worth of warranty repairs?!
U.S. car dealers did $7.7b, not U.S. Ford dealers.
The $7.7B is from all U.S. dealers not just from Ford alone.
umterp85 :
April 11th, 2008 at 11:20 am
To the point of this article—-to those that think Ford’s improving quality (as communicated in survey form) is bunk—–follow the money trail to the dealership level. As the article states—warranty work performed by Ford dealers has decreased significantly over the past few years. This notion gets beyong the 90 day inital quality stuff and into a more substanative trend.
They’ve also had decreasing sales. Let’s see the warranty-dollar-spent-per-vehicle-sold number, and let’s see that figure tracked over several years.
They’ve also had decreasing sales. Let’s see the warranty-dollar-spent-per-vehicle-sold number, and let’s see that figure tracked over several years.
Ignore the silver lining…just look at the clouds…
Mj0lnir wrote:
Let’s see the warranty-dollar-spent-per-vehicle-sold number, and let’s see that figure tracked over several years.
If those numbers are also dropping, then there are more silver linings than there are clouds. And yes, this is the type of information they should be bragging about. The fact that they aren’t tells me that when the numbers are looked at closely, which they might not want people to do, the silver linings disappear and all you’re left with are storm clouds.
Per the questions on warranty/vehicle:
The article states that Ford warranty costs have gone down 12% between 2006 & 2007, and also went down 12% between 2005 and 2006.
Considering Ford has a 3-year bumper to bumper warranty, let’s assume the average age of the cars being serviced in those years was two years old.
Ford’s decrease in total sales from 2003 to 2004 was down 4.5%, and sales from 2004 to 2005 were down 4.6%. These numbers include only the Ford, Lincoln, and Mercury brands.
The warranty repair rate has been shrinking roughly three times as fast as the sales rate has, which would show increase quality.
Also, when the 7.8b number was given it was not specified if that was profit or revenue.
@ MattVA-
Sounds good to me. Looks like Ford has made strides in product quality.
jolo: And yes, this is the type of information they should be bragging about. The fact that they aren’t tells me that when the numbers are looked at closely, which they might not want people to do, the silver linings disappear and all you’re left with are storm clouds.
I think one problem is communicating this in a catchy and memorable way.
It also touches on some sensitive issues – the dealer profits when you bring the car in for warranty work, and most people would rather not have to bring the car to the dealer in the first place, as it’s an inconvenience, whether the work is performed for free or not.
Perhaps Ford can conjure up its version of the Maytag repairman – the lonely, bored Ford technician…
I can’t say that I really fault Ford for not playing up the warranty claims issue. The buying public has bought in so completely to whole J.D. Power thing that I can understand their reluctance to spend advertizing dollars trying to prove their point with a different sort of statistic.
Can you honestly imagine trying to explain to consumers that a decrease in dealer income = better quality at Ford?
First rule of auto advertising, unless you are Lexus, never talk about your dealer experience. Ford’s dealers have gotten remarkably better in the last couple years, just based on my experience, but it’s not a “good” experience, simply acceptable. Second rule, don’t make consumers think, because they don’t do that very well.
I have a very good friend of mine who has been losing money hand over fist as a Ford dealer in a very large metro market.
When Ford helped him buy it out, the dealership was supposedly making a profit. Fat chance. The numbers were cooked thoroughly and the actual loss for the prior year was closer to a half mill. To top it off, this dealership had been screwing an awful lot of folks in the community for a very long time.
Long story short, he’s thinking about dropping it. This after spending 2+ years in Ford’s dealer training program and throwing most of his life’s savings into the deal. Meanwhile marketshare continues to dwindle and Ford will pretty much have the oldest model lineup in the U.S.A. until 2011.
well the couple of ford dealerships I went to add a couple of things (in a fools errand to made the focus go faster) one oufit told me putting a new header on would invalidate the warranty (and to basically piss off) and the other on being told I wanted the svt suspension parts from Ford Racing “we don’t handle that stuff”
I have to say that Ford (the company) has been responsive to complaints I’ve had over the years while the dealers not as much. But even that attitude from the dealers is changing, much more so than dealers peddling the General’s products.
well the couple of ford dealerships I went to add a couple of things (in a fools errand to made the focus go faster) one oufit told me putting a new header on would invalidate the warranty (and to basically piss off) and the other on being told I wanted the svt suspension parts from Ford Racing “we don’t handle that stuff”
I know of very few dealers that are willing to perform aftermarket installations, even on factory racing parts.
You should check the fine print in your warranty to see if the installation of parts does void it out.
N85523: You’re sittin’ here, you’re talkin’
in circles! You’re talkin’ like
we didn’t go over this already!