Dealers

Our dealers are a critical part of our success and important economic contributors to the communities in which they work. They represent the face of Ford in communities across the U.S. and provide employment, tax support, community leadership and customer service. Ford and Lincoln dealers in the U.S. alone employed 158,000 individuals at the end of 2011, with an annual payroll of approximately $6 billion. Worldwide, we had 11,790 Ford and Lincoln dealerships as of year-end 2011.

In 2011, we continued to right-size our dealer network to current and expected U.S. demand, particularly in some of our largest metropolitan areas. In these ongoing efforts to address overcapacity, we have been working collaboratively with our Ford and Lincoln dealers to consolidate and restructure.

In addition, we began working with our Lincoln dealers to focus our mutual efforts on the transformational change necessary to meet the high expectations of the luxury customer, including upgrading dealership facilities and the services provided at those dealerships.

U.S. Ford dealers were more profitable on average last year than in 2010, as lower incentives, newer vehicles and consumer desire for in-car entertainment features boosted the purchase price for new vehicles.

Engaging with Dealers

Dealer relations are a key priority for us. The Dealer Council provides a forum for open dialogue between Dealer Council members and Ford. Through the council process, dealers can voice their concerns, needs and ideas for working more productively as a team. In 2011, we separated the Ford and Lincoln National Dealer Councils to better focus on the unique priorities of each brand. In an annual process, dealers identify their priorities, which are published along with Ford management responses, providing transparency to the discussions between the Company and its dealers.

To ensure that communication lines remain open, Dealer Council members also participate as members of National Dealer Advisory Panels. The current advisory panels, and the topics they address, are as follows:

• Customer Viewpoint Advisory Panel – customer satisfaction rating system, Viewpoint survey
• Product Committee – current and future product cycle plan, including lineup, design, styling and color/trim
• Order Complexity Task Force – reduction of vehicle ordering complexity, order guide simplification
• Marketing Dealer Advisory Board – vehicle packaging strategy, advertising, incentive programs
• Training Advisory Board – dealership employee training and recognition
• Parts and Service Manager Advisory Committee – fixed operations programs, including employee recognition/retention
• Commercial Truck Advisory Board – sales, marketing and product programs
• Service Marketing Advisory Committee – service marketing strategy and advertising
• Consumer Experience Committee – approaches for enhancing the overall consumer experience and network profitability

The feedback gathered through these interactions has helped us develop programs, change policies and enhance processes to improve customer handling and other significant elements of the dealers’ businesses.

In addition to the feedback provided through the Dealer Councils and Advisory Panels, dealer satisfaction is measured in various ways, including the biannual survey of the National Automobile Dealers Association (NADA) and day-to-day interaction with our dealers. Approximately 67 percent of our dealers provided feedback through the summer 2011 NADA survey process. We showed notable improvement in many areas in this survey, including in our Regional Sales, Service and Parts Personnel rankings. In addition, Ford Motor Credit Company Capability rankings exceeded the industry and previous scores in nearly every category. Finally, Senior Management Effectiveness, Dealer Communications, Marketing and Vehicle Incentives also showed favorable results.

Working with Dealers

Ford takes a proactive, collaborative approach to working with our dealers to appropriately size our dealer network to match our sales, market share and dealer sales objectives. Ford’s dealer network revitalization plan focuses our efforts on the 130 largest metropolitan market areas, which represent more than half of Ford’s retail sales. Customer convenience factors such as driving distance, location and the appearance of the facility are taken into consideration as part of our analysis. Ford is not mandating dealer consolidations or facility actions. Instead, we and our dealers are working together to continue finding solutions that make Ford and the dealers competitive and best positioned to meet customers’ expectations.

In the U.S. at year-end 2005, we had 4,396 Ford, Lincoln and Mercury dealers, with 2,242 of those dealers in our largest 130 markets. As of year-end 2011, we had 3,339 Ford and Lincoln dealers (a reduction from 3,424 at the end of 2010). We will continue to work collaboratively with our dealers to reduce our dealer network to match our sales, market share and dealer sales objectives.

Dealer Diversity

Diversity and inclusiveness are part of Ford’s DNA, and growing a strong minority presence in our dealerships is very important. At year-end 2011, Ford had 174 minority-owned dealerships, which represents 5.2 percent of our 3,339 U.S. dealerships. We continue to work with our dealers to provide a foundation for a stronger future for ethnic minorities in all aspects of the industry through the creation of a unified minority dealer group – the Ford Minority Dealer Association (Ford MDA). Working together, we have developed a ONE Ford approach to minority dealer operations by focusing on five key strategies to promote, sustain and grow ethnic minority representation of Ford Motor Company brands. With a focus on education and creating awareness, the Ford MDA will create minority retail career opportunities, enhance dealer profitability and viability and identify multicultural marketing opportunities and community involvement.

Dealer Sustainability Program

In 2010, we launched a voluntary sustainability initiative for our dealers to reduce their carbon footprints and increase their energy efficiency. The goal of the “Go Green” Dealer Sustainability Program is simple: to collaborate with dealers to implement cost-effective ways to improve the energy efficiency of their facilities. We partnered with the Rocky Mountain Institute, a leading energy-efficiency organization, to pilot new technologies and architectural design principles.

In 2011, we established our initial Ford Electric Vehicle (EV) national dealer program to support the launch of the 2013 Focus EV. Having launched a successful “Go Green” Dealer Sustainability Program, we decided it was a natural fit to bring the two programs together. As part of the EV certification, then, every Ford EV dealer will undergo an energy assessment to identify opportunities to reduce their overall carbon footprint and lower their energy expenses.

With more than 150 dealers (located in 17 different states) enrolled in the first phase of the EV program, Ford established an Energy Team to manage the energy assessments. Ford partnered with KEMA, a global leader in energy consulting, to complete the actual assessments. The completed assessments identified an average dealer annual cost savings opportunity of more than $30,000 per year, or 30 percent of their energy costs, with an average dealer payback period estimated at 3.4 years.

Going forward, Ford will continue to have a Go Green Assessment be a significant component of our EV dealer network expansion. In addition, we will continue to work with our dealers to encourage the consideration of green solutions during facility renovations.