In the wake of Ford‘s announcement that it is eliminating the Mercury brand after 72 years, existing franchises that peddle the division’s offerings – a total of 1,712 dealers in the U.S. (276 of which are exclusive Lincoln-Mercury stores), are being offered cash compensation. Production of all Mercury vehicles will end in the fourth quarter of this year, meaning that it’s likely there won’t be any 2011 models for dealers to sell.
Although, according to Ford, Mercury’s total market share stands at a 0.8 percent, some Mercury models, notably the old Grand Marquis were still highly profitable. According to Ford’s U.S. Sales Supremo; Ken Czubay, the dealer compensation package is based on a three year sales average of Mercury branded vehicles in relation to the percentage of total vehicle sales at each dealership.
“We feel the compensation we’re offering them is reasonable and fair,” said Mark Fields, Ford’s President of the Americas. “It goes beyond what the franchise agreements state and well beyond what our competitors have done in the marketplace.” Ford has also stated that on the parts side, it will let the existing Mercury franchises keep their parts inventory and pay 10 percent of the value on those parts. Therefore, if a dealer had invested $1 million in parts inventory, it gets to keep all those parts and Ford will issue a check for $100,000.
However some dealers feel they’ve gotten the short end of the stick. One, who’s been offered $200,000 based on sales his store generates through Mercury sales, says that it’s still not enough, especially considering he invested millions of dollars building a brand new showroom in the last three years. Another, who says he sells about 350 Mercury cars and trucks a year – generating $2 million in revenue, has been offered $500,000, but says that the compensation is not enough, considering the loss of sales the brand closure is likely to bring, at least in the short term. “My property is also likely to be now worth less,” he stated.
[Source: Automotive News]