Dealers wary of new VW margins

Manufacturer tries to simplify with a higher base rate, but it scraps nearly all bonuses

Wolfsburg, Germany. Volkswagen is getting mixed reactions to its new dealership margin and bonus system.

The company wants to introduce the changes in January, and dealers are supposed to sign the contract amendments for it by Sept. 15.

VW is raising the basic margin from 11 percent to 15 percent of sticker price for almost all models, and to 16 percent for the Touareg. But even as it boosts the base margin it is dropping supplemental payments, except for its corporate-design bonus.

Extra financial rewards for sales volume, customer satisfaction and demonstration vehicles are being scrapped. But bonuses for the Phaeton are expected to be simplified. Currently, they can range between 4.5 percent and 7.5 percent of the sticker price, according to dealer sources.

Dealers approve of the system's simplification but not a drop in the maximum total margin. Overall, dealers can only achieve an 18-percent margin under the new program, not the current 20 percent.

"The total margin is too thin," said Mathias Petter of the Fleischhauer Autohaus in Cologne. But the streamlined system is bringing "clear advantages for planning and liquidity," he said. As a result, Petter said he is looking at the reorganization with "mixed feelings."

Armin Cardinal of the Max Moritz dealership in Hagen notes that he doesn't know all the details of the new system. He is not expecting improvements for his business but he does appreciate the simplification.

Michael Lamlé, spokesman for the VW dealer association, expects that "about 90 percent of VW dealers can do well and, to a great extent, can do better with the new system."

Said Peter Maiwald, head of VW sales:"The average margin for our partners will definitely improve."

But there could be disadvantages in individual cases. Large dealerships and dealer groups, who have enjoyed abundant bonuses, now worry about the smaller total payouts.

For dealers that don't want to sign the supplemental agreement, VW says a modified bonus system based on the current program is in effect. It has a base margin of 11 percent of sticker price and a maximum bonus of 9 percent.

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