VW execs seek ways to shave sales costs
Browning: "It's about looking at cost as seen from the dealer perspective -- not the costs as we see them, but the costs they see."
ORLANDO -- Volkswagen of America executives on Sunday plan to discuss with dealers a new plan for achieving an old goal: slashing the per-unit cost of selling cars.
VW decided in late 2012 to meet with dealers over the coming months and come up with ways to trim expenses and to help VW reach its goal of increasing U.S. sales.
The company will then set a cost-cutting target -- say, 3, 4, 5 or 6 percent -- for its U.S. dealer network, said Frank Trivieri, executive vice president of sales.
"It's about looking at cost as seen from the dealer perspective -- not the costs as we see them, but the costs they see," Volkswagen of America President Jonathan Browning told Automotive News last week. "Over time, we're looking to reduce the per-unit cost of doing business. We're making sure that we're driving efficiency and productivity."
It is the sort of plan that could raise the eyebrows of dealers, who tend to worry about costs being loaded upon their shoulders. Browning tried to tamp down those concerns, saying he intends to sustain the profit margin for its dealers in 2013.
Volkswagen says the tally of profitable stores rose from 83 percent in 2010 to 90 percent in 2012, with 197 dealerships making more than $1 million in net profit. Browning said VW stores now are competitive with Honda, Nissan, Toyota and Hyundai dealerships in terms of their profits.
Still, some of the brand's dealers do not see it.
"Our margin is very, very thin," says Jack Hanania, a Volkswagen dealer in Jacksonville, Fla., who also has Acura, Audi, Fiat, Hyundai and Mitsubishi stores. "Yes, we're selling more cars than ever before. We're happy to be a Volkswagen dealer, and we think Volkswagen has got a lot of success coming down the pipeline, but the margins have shrunk in the last four or five years."
Once it sets a cost-cutting target, Volkswagen does not intend to start rewarding dealers for lowering their per-unit costs. The company says becoming more efficient will make dealers more profitable, serving as its own reward.
You can reach Gabe Nelson at email@example.com.