Volvo revamps margin and bonus structure
 | Maloney: Volvo will offer “the highest margin potential in the luxury-car business.” |
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ORLANDO -- Volvo is putting a new margin and bonus structure into effect with the launch of 2014 models.
The new structure contains variable elements tied to sales performance, customer satisfaction and updated facilities. It will give dealers the potential for better profits overall, said John Maloney, Volvo Cars of North America CEO.
With nearly flat sales in 2012 and a long wait for fresh product, Volvo dealers are struggling. Volvo sold 68,117 vehicles in 2012, up just 1 percent from 2011. Industry sales rose 13 percent last year.
"It's part of an overall plan to grow the business and make retailers more profitable," Maloney told Automotive News after the Volvo make meeting. "The highlight of the change is [that] we will, through margin and bonus, actually offer the highest margin potential in the luxury-car business."
Volvo will offer a potential margin of up to 17 percentage points on the S60 and XC60 and up to 16 percentage points on other models, he said. That's an increase from today's 14 points. The changes will start with the launch of the facelifted 2014 S60 and XC60 in June and run for the next three model years.
Since variable components are linked to performance, Maloney wouldn't say all dealers will be more profitable. But he said any dealer who meets customer and service satisfaction targets plus 100 percent of his sales target will make more money for the 2014 model year.
Volvo's dealer council, which had input into the changes, expects the new structure to be better for all dealers, said Chip Ott, outgoing chairman of the Volvo Retail Advisory Board and a dealer in Fort Washington, Pa.
"We didn't say, 'We think you should change the margin structure and put some things at risk that aren't at risk,'" Ott said. "But at the end of the day we all know we need to do things a little bit differently. The only way we know we are not going to change our sales is to keep doing the same thing."
In other developments:
• Volvo will increase its advertising spending by 30 percent this year in an attempt to jump-start showroom traffic and increase sales. A new ad campaign will be launched in the second quarter.
Maloney wouldn't talk about the dollar increase. But advertising will be more consistent through the year, and most of the increase will go to TV and digital.
• Volvo is projecting sales to increase 5 percent this year. That would put U.S. sales around 71,500 units.
Maloney said: "We're making a number of really significant changes to try to change the momentum in 2013."
• Advertising budget will rise by 30% in 2013
• Executives target a 5% sales increase in 2013
You can reach Amy Wilson at awilson@crain.com.
