Ford moving towards custom orders, away from huge inventories

[IPOGT]

Ford's allocation BS is largely to blame. Build as many as people will actually order and buy.

As it was described to me, a dealer only gets so many allocations, and they depend on sales volume. Back when I inquired about ordering my '15, through a smaller dealer that moves very few Mustangs per year, I was told that they could order with no issue if they had Mustang allocations; they had no problem ordering it X-plan, but had to have that allocation. No problems there since they had only ordered a couple. But it could have been a bottleneck on me ordering a GT.

When it comes to something like the GT500, allocations are very few; a dealer has to move a ton of Mustangs for more allocations (plus the enrollment in the Shelby program). I wanted a base GT500 (let alone a CFTP) bad early last spring, but ADMs were rampant and I'll never pay one, knowing that things would cool off. Throw in the 'rona and a couple of major life events since, and I'm on the fence now after (too) much consideration. Lost sale? Maybe, let's wait and see about a '22. Fast forward to today and I've reached out to a couple of dealers that I've learned will sell one at MSRP, and allocations are full plus there's a list. I just want to buy a goddamn car and the hoops one needs to jump through have annoyed me nearly to the point of saying to hell with the whole idea.

As far as pricing on the GT500, I feel they're right where they need to be. Ford's build quality will never merit more and, frankly, might be a little high considering there's no special QC treatment given for the flagship model. But that's another topic.

If you want special treatment, I bet a Ford GT would do it!
I felt as you did about buying a GT350. The ADM was stupid and though I’d love the car, ADM is something I’d never pay. Wish I knew Zach@Granger then.

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[Norm Peterson]

Am I missing something or is there some essential reason we need to keep dealerships around?

At least for the test drive function. Some things you can't know from any form of advertising brochure or online descriptions.

Things like seating comfort for you, individually, and for your spouse/significant other. Ease of reaching and operating the various controls. Ride comfort over real roads.


Norm

 

[shogun32]

Wish I knew Zach@Granger then.

he probably would have run out of 'allocations'. This system is indeed stupid. If there are production slots that can be filled, then orders should come from any and all dealers in whatever lopsided distribution they happen to be in. You could make a case for state-level caps so that California doesn't book the entire year's allotment in one fell swoop and leave 47 other states unable to get ANY. Though you can still come up with an algorithm that allocates a minimum count to each region/state based on population and previous sales trends and still allow dealers writing good deals to benefit from their enlightened stance.

 

[Super-Genius]

he probably would have run out of 'allocations'. This system is indeed stupid. If there are production slots that can be filled, then orders should come from any and all dealers in whatever lopsided distribution they happen to be in. You could make a case for state-level caps so that California doesn't book the entire year's allotment in one fell swoop and leave 47 other states unable to get ANY. Though you can still come up with an algorithm that allocates a minimum count to each region/state based on population and previous sales trends and still allow dealers writing good deals to benefit from their enlightened stance.

Holy shit Matt, you said something I actually agree with If you would stop being wrong so much, I'd agree with you a lot more

In other news, I think I've ordered 6 cars over the years. The only one I had to pay MSRP for was the 03 Cobra. I remember a lot of dealerships at the time asking 5k over. The guy I bought from had 6 allocations and they all sold for sticker ... or that's what I was told

I inquired about ordering a Camaro early last Spring and was quoted Invoice minus 10% . As far as internet sales go, that's how I bought my current car. I didn't need a test drive or anything. It was optioned just like I wanted, was the color I wanted, and was told the car had 4 miles, which was correct. Advertised for about 4800 under sticker, for a lightly optioned car. I basically bought it over the phone, and went to the dealership that afternoon.

I agree with an earlier poster that said the dealerships will throw a fit over this situation. I would think especially large, high volume ones.

 

[04DarkShadowGT]

dont dealers make most of their money from servicing vehicles?

Dealers from my experience make way more on used cars than new. They can make more money in the back office on a deal than the profit from selling the car itself. Warranties, interest rate hikes, etc.

 

[w3rkn]

This will make for a more pleasurable dealer experience....

You walk in and order your car, how you want, to your liking. You don't feel ripped-off for buying a "package" that you didn't want, etc.

Your car comes and you get treated right!



How you kit your car out to your liking, is the only thing that will change for Mustang owners/buyers. Most people just don't roll on to a lot and buy a Mustang GT. Those people are not what drives the demand.

 

[Hi-PO Stang]

Farley did not say Ford dealers would stop having inventory on hand , but said they would not have huge inventory on hand in the future. Ford Motor Company needs to revaluate how they do business. I think Ford will do well by having less inventory sitting on dealer lots . Some take things in the wrong way and overreact to new ideas. How a company reevaluates their business model is good for everyone.

 

[Balr14]

I worked in my uncles dealership and developed a number of friendships with dealers over the years. They are all gone now, but I learned a number of things from them. Profits on new cars are not high. Especially with base models. The profits are in the options. There are a number of incentives the manufacturers provide to help, especially with inventory. Used cars are a better profit maker. So are extended warranties and service. A big money maker is the kickback they get from loans. So, if you intend to pay cash, don't let them know before you sign the papers.

 

[ShadesOfBloo]

dont dealers make most of their money from servicing vehicles?

That's what a former salesman told me today. The Ford place where he worked made money on service plans, and service charges.

I thought dealerships would be important to handling warranty work, but the conversation today made that seem uncertain. The guy said their mechanics didn't do much work beyond oil changes and tire rotation, and they accomplished most of their work by sending the cars to other shops, then charging the customer dealer rates.
...And made more profit on that than selling new cars.

Having Mustangs in stock (especially expensive ones like the GT350 & 500) wasn't nearly as profitable as having trucks on the lot.

 

[ShadesOfBloo]

At least for the test drive function. Some things you can't know from any form of advertising brochure or online descriptions.

Agreed.
I could find out a lot about a Mustang by renting one for a weekend (like how much I disliked the automatic, and the screen that changes the gauges when I changed the driving mode).
But there are a lot of negative opinions about the Chinese-made manual transmission so I had to try it out for myself, and renting a manual car in my area is virtually impossible, so it required a test drive at a dealership.

 

[Angrey]

I think you guys are overthinking it a bit. The "system" should simply be, you place a non-refundable deposit on a special vehicle order and Ford tells you then (based on how many pending orders there are) how long you'll likely wait. If you don't like that duration, you either pick a different model or don't buy. No allocations needed. First come, first serve, nationwide orders. The more orders Ford receives, the more they spit out of that vehicle.

In fact, when you think about it, it's actually BETTER for everyone. The dealer gets a sale that doesn't have to sit there on their lot (reducing all sorts of cost from their General Liability policy to even the size of the facility) (imagine if 40% of a dealers sales were direct from factory and the customer picked it up the day it arrived.).

Someone said the way dealers make their money is off service or used car sales. WRONG.

The biggest profit for a dealership is........

Land value.

If you want a winning strategy for a dealership, you buy an urban dealership, even if you just break even for 20 years, by the time you sell the dealership, the land value for development is worth 5-20x what you paid for the property. And most dealerships do better than breaking even.

The company I work for bought a 5 acre dealership (that's now a giant mixed use facility now, but was an abandoned dealership being used for spillover parking/storage for another dealership nearby). The entity that owned it put a 20% capital down payment onto a note. They paid the note (offsetting costs with the rent from the other dealer). In 12 years they sold the property for 5.5 times their original note. Which means they basically made 25x their original investment.

Urban dealers sit on top of an ever increasing real asset. Land.

 

[shogun32]

The more orders Ford receives, the more they spit out of that vehicle.

one wrinkle is that Ford has to sign contracts for fixed quantity delivery with options for more long before the order banks open. Say Marketing guesses 5000 units will sell for a MY. Ford then contracts with the transmission supplier, the speaker supplier, the glass supplier, etc for 5000(ish) units. If by say 1/3rd of the MY the trend line is way off, they may exercise their options, or pay penalties for not taking delivery of the contracted numbers.

 

[Angrey]

one wrinkle is that Ford has to sign contracts for fixed quantity delivery with options for more long before the order banks open. Say Marketing guesses 5000 units will sell for a MY. Ford then contracts with the transmission supplier, the speaker supplier, the glass supplier, etc for 5000(ish) units. If by say 1/3rd of the MY the trend line is way off, they may exercise their options, or pay penalties for not taking delivery of the contracted numbers.

They do all that anyway. With zero custom orders the contracts are 100% naked and projections.

Everytime someone places a custom order, it simply soaks up that one production slot.

So if Ford decides to make 8,000 F-150's next year and 7,000 people order direct, they've just reduced their risk considerably because now they only have 1000 (or however many they want to adjust) vehicles sitting on dealer lots hoping to be sold.

On a spectrum of 100% make it and hope it sells to 100% only make it if someone orders, they're much better off on the latter. The estimate risk is much MUCH less.

In truth, the process is already similar to that where dealers consume the orders, but someone in the know would have to chime in on who takes the risk when a dealer orders vehicles from Ford, and what the ins and outs of deposits or liabilities look like if it doesn't sell, etc.

 

[BrianGT2015]

Hey, if the let us get what we want like the cars from back when you can buy a car that is pretty much tailored to your liking and needs.

5.0 with the 10 speed auto, manual cloth seats, no radio, no AC, rear end of your choosing, tire size of your choosing (if you are replacing rims getting the cheapest tires and wheels, maybe you want the brembos still though. So on and so fourth. To some people ordering a striped down plain Jane car with the biggest engine you can get is the way to go. Could you imagine seeing a regular GT running around with a cobra motor and Trans. You do all the other modifications want to do. I likes it. I likes it a lot. You prolly can knock the price down and just spend money where you want.

 

[Norm Peterson]

They do all that anyway. With zero custom orders the contracts are 100% naked and projections.

They're still 100% naked and projected as far as sourcing the various "optional" components is concerned.

People complain about order to delivery times as it is. What if you had to put your order in early enough for Ford to have a better handle on sourcing unknown quantities of components from their suppliers? Suppliers need lead time, too.


Norm

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