L.A. Ford Dealerships Tally Big Losses in Year-to-Year Revenues

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After years of weak financial performance, Ford Motor Co. turned it around last year by reporting $3.5 billion in net income, thanks to improved efficiencies, financing income and international sales.


But there was one big fly in the ointment: U.S. sales fell 4.5 percent, sending the company’s domestic market share down to 19.6 percent from 20.8 percent.


And that’s what really matters to local car dealerships.


Four Ford dealerships made the Business Journal’s latest list of top dealerships in Los Angeles County as ranked by revenue. But reflecting the automaker’s sagging fortunes, all saw their vehicle sales and revenue decline by a combined 3,019 units and $105.6 million.


Galpin Ford, the national’s No. 1 Ford dealer for the past 15 years, took the biggest hit, reporting a drop in revenue of $73.4 million, or nearly 17 percent, according to Wards, an automotive research firm.


The culprit, according to many in the industry, was an uninspiring product lineup that only recently has seen some improvements.


“To be unpopular in L.A. can make you unpopular in the rest of the country,” said Ivan Feinseth, who covers Ford for institutional investors as research director for Matrix Investment Research in New York.


Also seeing declines were Power Ford Valencia, Vista Ford in Woodland Hills and Power Ford Torrance. Only one other dealership on the list saw a decline in sales last year: Cerritos Buick Pontiac GMC, which sells a lineup of General Motors Corp. vehicles.


With around 5,000 new or used auto dealerships in Los Angeles and Orange counties, the region is considered the nation’s most competitive and trend-setting. Car buyers here not only tend to be more open to imports, but their tastes often set the tone for the rest of the country.


And Ford remains stuck with a perception of producing boring cars that aren’t as reliable as their Japanese competitors, although a few mainstays have kept the dealers going.


The Ford F-Series remains the most popular pickup truck line in the nation and Los Angeles, with 12,098 units sold here for the year ended June 30. That makes it the fifth most popular vehicle locally, behind the Toyota Camry and Corolla and Honda Accord and Civic.


In addition, the latest incarnation of the Ford Mustang, introduced last fall and sporting retro design motifs reminiscent of the classic 1960s version, is one of its few bright spots, though not enough of one to overcome lackluster sales of other models.


That forced Ford this summer to match GM’s popular “employee pricing” program with its own “Ford family plan” promotion. As a result, Ford’s U.S. sales were up 29 percent in July, totaling 366,548 units, a new record for the month.


But even as the promotion has been extended, local dealers know it cannot go one forever. “The key is to get hot product,” said Galpin Vice President Brad Boeckmann. “When you get hot product, you don’t need incentives.”


Still, Boeckmann notes that the 59-year-old dealership his father Bert took over in the mid-1960s tends to take the long view of sales downturns.



Survival strategies


While Ford Motor Co. plans to lay off 2,750 of its 35,000 white-collar workers in North America this year, the dealership hasn’t had to lay off employees during the time the Boeckmann family has owned it.


That’s because dealers like the Boeckmanns spread the risk with hotter selling brands. Boeckmann’s separate Jaguar Lincoln Mercury group of luxury Ford vehicles saw an 8.9 percent rise in sales. The business also sells Volvo and Aston Martin vehicles, also part of the Ford family, as well as vehicles from Mazda Motor Corp., which Ford partially owns.


Other Ford dealers own competing foreign nameplates, such as Fritz Hitchcock, whose Hitchcock Automotive Resources Inc. operates dealerships in Los Angeles and Orange counties selling Toyotas, Scions, BMWs, Mini Coopers, Volkswagens, and Lotus vehicles.


Hitchcock dropped Ford in the 1980s after some tough years, getting back when the automaker’s truck and SUV sales rebounded in the early 1990s. This time, at least for now, he’s willing to give the reforms promised by Ford Chief Executive Bill Ford a chance.


Besides cutting overhead and focusing more resources on producing head-turning cars like the Mustang, the automaker wants to roll back sticker prices on its 2006 models and limit incentives.


The relatively new Ford Focus, a replacement of the aging Escort and a competitor to the Toyota Corolla and Honda Civic, developed a reputation for unreliability that it was never able to overcome and this year dropped off the list 25 most popular models, based on car and light truck registrations for the year ended June 2005.


Moreover, Ford and its dealers have never fully recovered from the safety questions that were raised about the Explorer, the SUV model that powered the company through the 1990s. Rising gas prices haven’t helped, with Los Angeles County sales down 42 percent in the year ended June 30.


For now, dealers have high hopes for the Ford Fusion, a mid-size model that will be introduced for 2006. So far, however, sales have not taken off for the recently introduced Ford 500, a competitor to Chrysler’s highly popular 300.


“The challenge all the Big Three have is to take the excitement the Ford Mustang and the Chrysler 300 have generated and spread that throughout their lines,” said Steven Szakaly, an economist at the Center for Automotive Research in Ann Arbor, Mich. “That’s not going to happen overnight.”

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