GM dealers: Recalls put bonus at risk
Retailers fear customer satisfaction will drop
Some General Motors dealers worry that an onslaught of safety recalls could jeopardize their quarterly incentive bonuses.
GM told dealers in recent weeks to stop delivering several high-volume models that later were recalled to fix safety defects. Among the nameplates sidelined on dealership lots for days or weeks as service directors await a fix procedure and parts from GM are the Chevrolet Cruze and Malibu sedans, Chevrolet Suburban and Tahoe SUVs, and the Chevrolet Traverse, GMC Acadia and Buick Enclave crossovers.
It's difficult to close a sale when customers are unable to take delivery right away or even test drive the vehicles, dealers say. Just a handful of delayed or lost sales can cost dealers tens of thousands of dollars in factory incentives if the retailers fall short of their sales targets.
To qualify for a quarterly bonus under GM's Standards for Excellence program, dealers must sell at least one unit more than they sold in the same quarter a year earlier. They also must hit a customer-satisfaction rating target. Amid shrinking profit margins for new-car sales industrywide, GM dealers have become dependent on the quarterly payouts from the SFE program, which range from around $10,000 for a small dealership to more than $150,000 for big stores.
The stop-delivery orders cost Ourisman Rockmont Chevrolet in Rockville, Md., near Washington, as many as 15 sales in May, or about 12 to 15 percent of average new-car volume, General Manager Dug Dugger estimates. Some customers have been unwilling to wait, choosing to shop for another brand.
"On a lot of these stop-sales, the customer just moves on," Dugger says. "I think it's especially tough in a high import market like D.C., where the customer has so many other options."
This year through May, GM issued an annual record 30 recalls covering 13.8 million U.S. vehicles, including some 2014 and 2015 models at dealerships. The total includes some vehicles more than once because they were called back for multiple recall-related fixes.
Dugger says his dealership has lost sales of the Malibu, Traverse and others because of the stop-delivery orders. He says the dealership has qualified for its SFE payment in each of the past two quarters, but is unlikely to qualify in the second quarter.
A GM spokesman said the company will consider case by case whether the stop-delivery orders would affect a dealer's SFE qualification. He said that because second-quarter sales have been strong, most dealers likely will hit their sales targets.
Some dealers also worry that their customer satisfaction scores will take a hit, which also could squelch their chance at the bonus.
W. Carroll Smith, owner of Monument Chevrolet in Pasadena, Texas, near Houston, says he had to call a customer last month to take back a 2014 Malibu that a salesperson had sold her that morning. A stop-delivery order had arrived from GM because some Malibus were assembled with rear brake rotors that went into the front brake assembly.
"She went ballistic," Smith says. "I know exactly what that survey is going to say when she fills it out."
At Brasher Motor Co. of Weimar, Texas, owner Tommy Brasher has been unable to deliver his biggest sellers -- the Enclave, Traverse and Acadia crossovers -- for about two weeks because of a safety recall. Last week, Brasher said he would have to find ways to pay his sales staff if GM did not supply a quick fix. His staff is typically compensated on commission with extra bonuses based on volume.
GM told dealers on May 19 to stop delivering 2009-14 Traverse, Acadia and Enclave units because of a recall to fix a front seat belt cable that can wear out and eventually fail, increasing the risk of injury in a crash. GM notified dealers on May 28 about the process to fix the flaw and began shipping parts.
John McEleney, owner of Mc-Eleney Chevrolet-Buick-GMC-Toyota in Clinton, Iowa, says he has had crossovers and Chevrolet Cruze sedans on his lot awaiting recall-related fixes. He has sold several vehicles with the understanding that the customers must wait until the vehicles are fixed before driving them home.
But he worries that other customers aren't as understanding.
"Do you lose a sale because you don't have a vehicle to sell and they go buy a Honda or something else?" McEleney says. "That's a cost you can't measure."
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