As Ford prepares to end Mercury’s 71-year run, the Dearborn-based automaker will offer dealers compensation based on individual franchise sales.
Ford’s compensation scheme is based on each individual dealer’s three-year Mercury sales average. According to Automotive News’ sources, dealers whose Mercury sales accounted for 0 to 25 percent of all dealer business would receive compensation of $1500 per Mercury sold annually, based on average. Dealers with 26 to 50 percent would be paid $1650 per Mercury while 51 to 75 percent would get $2000 per vehicle. Finally, dealers whose total sales were comprised of 76 to 100 percent Mercury products would be compensated $2500 per sale.
“We feel that the compensation we’re offering them is reasonable and fair,” said Mark Fields, Ford’s president of the Americas in an interview with Automotive News. “It is beyond what the franchise agreement states. It is beyond what state law states. It’s well beyond what other competitors have done in the marketplace.”
Compensation packets have already been sent to dealers, with values ranging from the low thousands to around $200,000. In addition to the physical Mercury vehicles, dealer signage, factory parts, and an intangible blue-sky value (goodwill) were also factored into the repayment. Ford will pay dealers for the full value of their factory Mercury parts without recollecting them.
“If 10 percent of a dealer’s business was Mercury business and he had $1 million in parts inventory, he’d have theoretically $100,000 in Mercury parts,” said Ken Czubay, Ford’s U.S. sales chief. “We said you keep the parts and we’ll write you a check for $100,000. No one in the industry has ever done anything like that.”
There are 1712 Mercury dealers, with 925 of them also housing the Ford and Lincoln brands beneath the same roof. Another 511 are Ford and Mercury fronts while the remaining stores are most likely only paired with Lincoln. There are no Mercury-only dealers in North America and Mercury production will end this year.
Year-to-date, the Mercury brand has sold 41,680 vehicles, an 11.6-percent improvement over the same period from 2009. Mercury rallied to sell 92,299 vehicles last year after moving 120,248 units in 2008.
Source: Automotive News (Subscription required)