Lincoln: No holdback, more cash (maybe)
DETROIT -- Lincoln is radically revising the way it pays dealers as it seeks to reassert itself in the premium segment.
No longer will Lincoln dealers get an automatic payment, known as a holdback, of 2 percent of a vehicle's sticker price, paid to dealers quarterly. Instead, dealers can get more than that -- but only if they meet new standards designed to boost sales of off-lease, certified-used Lincolns and improve the online sales and vehicle-delivery processes.
Lincoln also is raising vehicle invoice prices, on which its future payments to dealers will be based, by 1 percent, effective in January. Sticker prices won't be affected.
The changes, broadly in line with practices at luxury import brands, aim to fund dealers' ability to provide a good customer experience to luxury shoppers, Kevin Cour, Lincoln sales and service operations manager, told Automotive News. To compete in that segment, he said, "We need to continuously push ourselves and our dealers."
The changes "may be uncomfortable to some" dealers, but will make Lincoln more competitive, particularly in certified-used sales and residuals, "a part of the business that is important to protect for our dealers," Cour said.
Several import luxury brands, including Audi and BMW, do not pay holdback. Lincoln says 50 to 60 percent of luxury-brand sales today have no holdback.
The increase in the invoice price and the dropping of the holdback also reflects the rise of Web-savvy shoppers, Lincoln says.
"With the advent of the Internet and the access to pricing information being so prevalent in our business, holdback is in many cases negotiated at the desk," Cour said. "This is the direction that all premium manufacturers are going."
The changing payment structure to dealers is part of the second phase of the Lincoln Commitment Program, Cour said.
Phase 1, rolled out last year, set goals that dealers had to meet for signs, staff training and customer initiatives, such as providing car washes for all service customers. Nearly all Lincoln dealers in the top 130 U.S. markets meet the Phase 1 standards, Cour said.
Lincoln is focused on those 130 markets because they account for 90 percent of luxury-vehicle sales. Currently, 35 percent of Lincoln's 957 dealers are in those markets.
Among the Phase 2 requirements:
All of the dealership's Internet sales staff must be trained and certified.
At least 70 percent of Internet leads must receive a "high quality" response within 12 hours.
Dealerships will have to score high on customer surveys related to the new-vehicle delivery process, including the explanations of technology such as the Sync system.
Each store must have at least one certified "Lincoln brand champion," who will be fully versed on the brand's lineup, on the sales staff. This targets dealerships where Lincoln is dualed with other brands.
Dealers who met the Phase 1 targets received a quarterly payment from Lincoln equal to 2.75 percent of each vehicle's invoice price. Those who meet the Phase 2 targets will get 3.75 percent. Lincoln will start tracking Phase 2 compliance in May 2013.
In addition, Lincoln is launching two concurrent programs to promote certified used-vehicle sales. Dealers who meet one program's targets will get quarterly payments equal to 2 percent of their total new-vehicle invoice payments. Dealers who meet the second program's targets will get a flat amount per vehicle sold as certified.
Cour said Ford Motor Co. developed the changes with members of the Lincoln dealer council over nine to 12 months.
Lincoln's 2013 redesigned MKZ sedan will go on sale in mid-November, the first of several vehicles that the company hopes will redefine the brand. Lincoln promises four new or redesigned vehicles over the next four years.
Bradford Wernle contributed to this report
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