Should 'stair-step' incentive programs come to an end?

Would dealers and the auto industry as a whole be better off without stair-step incentive programs? Paul Walser, CEO of Walser Automotive Group in Bloomington, Minn., thinks so.

In stair-steps, manufacturers pay steadily increasing bonuses to dealers to meet a series of volume targets, typically as part of a monthly sales promotion.

Walser, who operates 11 one-price dealerships in the Minneapolis-St. Paul market, told me last week that the stair-step “prostitutes the cars.” Dealerships dramatically undercut each other on price to maximize bonuses. He calls stair-steps desperate, short-term measures for the weak.

It's not just a domestic-brand problem, Walser says. Some Asian manufacturers offer them, too. But give credit to Subaru and Hyundai, he says. Walser hasn't seen stair-steps from those brands of late. He then points out that Subaru and Hyundai have been two of the industry's biggest sales winners.