Ford and Priceline Partner in Florida Richard McCaffery (TMF Gibson)
November 15, 1999
Can the Internet take the haggling out of buying a car?
Probably not, but it's helping to bring new efficiencies to a capital-intensive industry, and is helping to educate a generation of consumers.
Ford Motor Co. (NYSE: F) and online retail firm Priceline.com (Nasdaq: PCLN) announced a partnership this morning that will allow consumers to name their own prices for cars and trucks in Florida.
Under the agreement, consumer bids will be transmitted to local car dealerships via the Priceline network, starting with the dealer closest to the buyer. Local dealers will either accept the bids or make counter offers depending on the bid and availability of products. Ford will start testing the concept tomorrow.
According to Ford and Priceline, it's the first time that prices named by customers and accepted by an automaker will be honored by local dealers. Once the test is concluded the companies will decide if, when, and where to expand the service.
Ford has moved quickly in recent months to build an online presence. On September 15, it hired Brian Kelley, a former General Electric (NYSE: GE) executive, to head its Consumer-Connect business, a unit in charge of handling Ford's direct relationships with customers.
A few days later Ford announced a partnership with Microsoft's (Nasdaq: MSFT) CarPoint website that will allow consumers to custom build cars and trucks online. The Priceline deal seems like the next logical step.
The advantage for Ford is that online initiatives should help streamline the sales process and give the company direct information about the buying habits of customers. Since taking over at Ford earlier this year, Chief Executive Jacques Nasser has put a premium on finding out what customers want.
In addition, it could be another step toward giving Ford -- and other auto makers that focus on direct relationships with customers -- better control over its business. Consider Dell Computer (Nasdaq: DELL), the box maker that changed an entire industry by skipping the sales channel and selling directly to consumers and businesses. By doing so, Dell not only developed super-efficient manufacturing processes but kept inventory levels low because it didn't build machines faster than customers bought them.
Because auto makers traditionally are far removed from customers, they don't have firsthand information about customer demand. This makes it difficult to control inventory because the company has to guess how many cars to build. Teaming with Microsoft and Priceline gets Ford that much closer to its customers -- without alienating its retail dealerships -- and could lead to sharper inventory management.
For Priceline, the deal adds to its growing stable of name-your-own-price services. The Stamford, Connecticut company has three major product categories: travel (airline tickets and hotel rooms), personal finance (home mortgages, refinancing, and home equity loans), and automotive (new cars in nine states).
From a consumer's point of view, the advantage of the Priceline/Ford agreement is obvious -- better prices. But Priceline and Ford aren't simply handing buyers better deals. Instead, the deal encourages buyers to do their own research and submit a reasonable offer in exchange for products and services.
That's the power of the Internet, and that's what Foolishness is all about.