FORD BLUE OVAL CERTIFICATION

[ROB]

I am interested in hearing from Ford franchises about their impression of the Blue Oval certification program about to begin. Do you feel that you will qualify and if so, how much change and expense will it take? Do you feel that it will be good for business and will you become non-competitive if you do not qualify? Do you feel that you will be able to become qualified using in house resources, or will it take outside help (either Ford sponsored or other)?

[mbowers]

I'm not a Ford dealer, just an observer of the industry.

On the surface, the Blue Oval program looks like what we call a Motherhood and Apple Pie statement -- who can be against them? And who can be against improved customer satisfaction?

However, the skeptic in me sees something else. The factories would dearly love to be able to offer price discounts to high volume and other preferred dealers and dealer groups. Current franchise laws, though, prohibit that practice.

If we accept the logic of the Blue Oval plan, that is, dealers who score well on this initial set of objective criteria get higher incentive payments from the factory, then doesn't Blue Oval become a backdoor route to differential wholesale product pricing?

What's to stop Ford or any other manufacturer from establishing another set of criteria for even more-favored dealers. Why limit the differential to a quarter of a point? Logically, there could be a Blue Oval Plus category that combines J.D. Power evaluations with volume targets or other criteria. Why stop at 25 basis points? Why not a 400 or 500 basis point differential?

I hope some of the more aggressive dealer associations at least raise these questions.

[Tubsey]

We are a dual DaimlerChrysler/Ford franchise and have achieved DaimlerChrysler Five Star Status. If Blue Oval is like Five Star, and it sounds very similar, you can expect to spend a significant amount of time and money to qualify. We are a small to medium sized dealership ($24,000,000 in sales) and we put a person in charge of Five Star on a full time basis until we were certified. After you achieve certification it won't require a full time person to manage it but it will still take effort to keep certified. You will also need to spend money on facility and training. I would guess we spent $30,000 or so to get certified in addition to the expenses that overlap. Five Star does not qualify us for vehicle discounts, but we get favored status, better employee discounts, no charge incentive programs and other treatments. Overall, the continuous improvement processes are beneficial as long as you use the processes for improvement, not just to obtain Five Star or Blue oval.

[fordman]

I work at a Ford dealership and our initial reaction is less than ecstatic about the new program. I agree with Rob, that who can be against customer satisfaction, but it appears to be an attempt to force small dealers out of the business, and give large dealers a volume discount. Ford appears to be micro-managing our business. At the recent Quality Care Leadership meetings, Ford stated that 74% of CSI is from PRODUCT. Why doesn't Ford spend their time improving quality of product, instead of micro-managing their dealers. The retro-active payment of the 1.25% is lost if you do not pass on the first attempt. Ford is paying J.D.Powers for the first attempt, it would appear that Ford has a lot to gain financially, by having Power be as strict as possible and trying to fail as many dealers as possible on their first attempt. By the way how is Powers going to get to over 4000 Ford dealers for these onsite evaluations between 7/1-4/1. That is only approx 185 working days. We'll just have to wait and see, but I don't want to be one of the first dealers to be inspected.

[rob k]

Fordman makes a good point. The cost transfer appears to be the most objectionable point of the program. Hopefully GM's coming version will not copy Ford's, and Ford will reconsider this feature.

[sallen1]

Comments about these process-improvement offerings from non-Ford experience.

Both my dealerships have participated in Standards For Excellence (Cadillac) since the beginning. Here's some of the things that made SFE work for me.

The best part of SFE (besides the cash bonus, of course) is the customer research. We continue to research everything customers want (both Cad and non-Cad owners and the employees!) and the insight is powerful. Besides, the research topics are flexible and not dependant on what JD Power thinks important.

Anyways, the first couple of years, SFE was 'voluntary'. There's the annual fee charged at the end of the year and a little pressure to sign up. The 'facilitators' or consultants from Maritz worked pretty hard in the beginning but they were not spread too thin (# of dealerships or geography). The 'reward' came in the form of a calculation based on increased sales (measured against your district) and CSI scores higher than the district. When succesful in both, there was $250 per car sold given back and the bar was raised.

In the first two years this was quite a bit of $$. In the subsequent years, the payout has been a total amount (say $2,500,000 total) divided by 'points'. In every year we have received enough to cover the subscription. And there were the trips to Hawaii, Germany, Canada, ...

Then Cadillac made a mistake. They made SFE mandatory to sell the Catera. This added a bunch of dealers to the system who were 'forced', and you know how motivated you are with a gun to your head. There are now two SFE's, one (the original described above) and SFE II which had a lower suscription fee ($8000 vs. $15,000) and no cash bonus.

SFE still works for us except under the new field re-arrangement I find the MAM teams uninterested. They will become more so now because of the learning curve we've conquered. There isn't any 'qualification' or 'certification' process (which sounds expensive) because our measurement is based on improvement.

As M. Bower suspected, these things change the competitive landscape by effecting price. The bigger competitive advantage is in business improvement, but the real challenge is to master the system with little or no additional cost (which will be tough).

scott

[This message has been edited by sallen1 (edited 05-23-2000).]

[This message has been edited by sallen1 (edited 05-23-2000).]

[ROB K]

Thanks Scott.
As a former factory rep who went retail, I have been on both sides of the equation as an arm twister getting compliance and as the person responsible for implementing 5 Star for my employer. I agree that the standards set the copmpetitive edge, and that when it is is voluntary, it becomes more meaningful. As such, I feel uneasy about the proposed 1% surcharge and 1.25% payback. I believe that there will be enormous pressure to become Blue Oval certified by the local field staffs and pressure to relax the standards by dealers struggling to conform. I suspect that GM has a better idea with their proposed plan based on the Cadillac program.

Rob

[Matt Parsons]

Do Ford dealers think that in order to obtain Blue Oval certification they will have to implement a preferred or recommended dealer management system?

[This message has been edited by Matt Parsons (edited 06-01-2000).]