What happened
The stock market's been in a funk all week long and, with the S&P 500 down another 0.3% so far today, Thursday doesn't look any different.
Investors are by and large reacting to lousy economic news, such as the U.S. Bureau of Economic Analysis saying yesterday that the economy shrank 1.6% last quarter, instead of the 1.5% it previously thought. Adding to investor worries, the Commerce Department just reported that "core" U.S. inflation is high at 4.7% (and that's before adding inflation from higher food and energy costs). And to round out the trifecta of bad news headlines -- consumer disposable income is falling.
None of this is great news for truck maker Ford Motor Company (F 0.66%), which needs a healthy economy to support consumers buying more of its trucks -- and there's even more bad news today, "helping" to drive Ford shares down 2.1% (as of 1:05 p.m. ET).
So what
Specifically, Ford seems intent on taking a page from Tesla's playbook, and shifting its sales model to permit customers to buy Ford's new line of electric vehicles (such as the Mustang Mach-E, the F-150 Lightning, and the E-Transit electric van) entirely online.
From Ford's perspective, this is a logical move, because (as The Wall Street Journal reports), it costs Ford about $2,000 more to sell a truck via its dealer network than it does when that same truck is sold directly to the consumer. That's $2,000 potential profit Ford is giving up by sticking to the old dealership model for selling cars -- or $2,000 worth of discounts the company could dole out in order to underprice competitors and win market share.
Selling direct may be popular in Dearborn, and on Wall Street and Main Street as well -- but it's not necessarily going to go over well with Ford's nationwide dealer network. Ford must also tread lightly if it wants its new policy to adhere to the terms of franchise agreements it has signed with these dealers, and state franchise laws as well.
Now what
And Ford needs to stay on its dealers' good side, because the company's extensive dealer network is actually a competitive advantage for Ford -- providing a ready avenue for Ford EV buyers to get repairs and car servicing done -- as it attempts to go head-to-head with Tesla. To help shore up support among its dealers, Ford CEO Jim Farley spent hours this week talking with his company's dealers, fielding questions on the new policy.
The good news is that WSJ reports he was successful in raising "morale" among dealers in the run-up to rolling out this new plan. The (potential) bad news is that many of those dealers may be withholding judgment for now, pending the company's releasing its full set of new "EV-selling rules" in September -- at which point the fighting may begin in earnest.
Long story short, there's still plenty of time for this initiative to go south, and for Ford's plan to drive into a ditch.
