The merger of 11 Wasatch Front auto dealers into a single mega-dealership was on again Monday, 10 months after the idea was first floated only to be later shot down.
The dealers involved in the cooperative merger are all franchises of Ford Motor Co., including six Ford dealers, three Lincoln-Mercury dealers and two Mazda dealers (Ford has a majority ownership in Mazda.)The Ford Retail Network (FRN), as it is being called, will establish fewer but larger full-service sales outlets supplemented by neighborhood service centers, said Duff Willey, president of Marion Willey & Son Ford in Bountiful and chief executive officer of the new network.
The once-robust collection of small, family-owned car dealerships has been getting absorbed into fewer but larger operations, and the FRN just takes it a step further.
"Our industry is changing so fast that there's no question we need to become more efficient," said Willey. "This is a very competitive market and these dealers saw where it was going. It took some time, but in the end we came up with something that was mutually beneficial for Ford, all of us, our employees and our customers."
Currently, he said, a study is under way to determine which, if any, of the current dealerships will be closed, where the new neighborhood service centers will be built, and what name will be used for the new, merged network.
Willey said the deal is expected to close within 90 days and then the arduous task of making the big decisions will begin. "We're looking at two or three years to complete the transition," he said.
Although the FRN is a new merger concept, it simply continues a consolidation trend that has been going on for years locally in which prominent dealers such as Larry Miller, Garff Enterprises and the Rick Warner Auto Group have acquired numerous other smaller companies.
Last year, a merger was attempted between Garff and Warner that would have created Utah's largest auto dealer, but it was called off in March when the two couldn't come to an agreement.
Is all this consolidation good for the car buyer?
It can be, said Jeff Doerr, an industry analyst with the Salt Lake office of investment firm Dain Rauscher Corp.
"Consumers should get a better selection of vehicles and get what they want a lot quicker," said Doerr. "Also, it should eventually force prices down. Initially, dealer margins should go higher as they cut their costs by consolidating many of their operations. Eventually, those savings should be passed on to the consumer."
Doerr likened the trend in auto dealership consolidation to what is happening in the financial services, waste disposal and retail drug industry, all of which have been consolidating in the face of technology and rising competition.
"Because of such things as the Internet, these markets are becoming a lot more efficient," said Doer.
Willey conceded that employees of the 11 dealerships are nervous about the deal and what it means to them. "It's only normal that that would be their initial reaction," said Willey, "but we have all placed strong emphasis on our employees. We're expecting to grow the business and that depends on our having good people."
A spokeswoman said local dealers involved in the venture do not anticipate immediate closure of any dealership locations.
The merging of Utah's Ford dealerships into a single "super dealership" was first floated last July, when Ford proposed that the Wasatch Front become a testing ground for the concept in which the dealers would jointly own a new, merged entity along with FoMoCo.
The best enticement for the deal was that they would be eliminating their toughest competitors: each other.
"If you asked a Ford dealer who his competition is, he'd tell you it's the other Ford dealers in his area," said Ford spokesman John Ochs. "You wouldn't have customers going to two or three different Ford dealers trying to get the best deal. They'd all be in it together in a single dealership."
Ford said it would like to have all 17 Wasatch Front Ford dealers go along with the super-dealership but said it would settle for a thumbs-up from the five Salt Lake metro dealers. If one of those five refused, the deal would be dead.
In fact, some decided not to go along and the deal was thought to be dead. On Monday it was reborn with 11 dealers signing off on it. Under the new plan, all 11 dealers will be co-owners in the FRN with FoMoCo as a minority owner.
They are Henry Day Ford, West Valley City; Ken Garff Ford, Murray; the Warner Ford Superstore in Salt Lake City; Provo-Orem Ford, Provo; Tri-City Ford, American Fork; Marion Willey & Son Ford, Bountiful; Rick Warner Lincoln-Mercury, Orem; Middlekauff Lincoln-Mercury, Salt Lake City; Garff Bountiful Lincoln-Mercury, Bountiful; Garff Bountiful Mazda, Bountiful; and Rick Warner Mazda, Salt Lake City.
"We've been here for 49 years and we are pledging our assets to the new enterprise, so it shows how confident we are that this is the best thing to do, and the others feel the same way," said Willey.
The principals of the larger Ford dealerships that are not among the 11 were not available for comment by press deadlines Tuesday. When the deal was first announced last year, Jewell Lee Kenley, owner of Ed Kenley Ford in Layton, told the Deseret News that it was an "intriguing" plan but that she would not be joining.
"We've worked hard to build personal relationships with our customers and we're reluctant to let it go," she said, adding that the concept might work in some markets but she doubted that it would in this one.
But the 11 new FRN members now think it will work. Similar plans are currently under way in Tulsa, Okla., and San Diego, Calif., and have been "readily received," according to a Ford spokeswoman.
Some of the dealers have other auto franchises outside the Ford group, and those will continue to be operated independently.