Bonuses that Lincoln pays dealerships for meeting operating standards violate Texas law, an administrative judge has ruled.
Lincoln's "Premier Experience" incentive program pays the bonuses as a percentage of vehicle sticker prices. That practice violates a Texas law that prohibits two-tier pricing, the judge said.
Lea Anne Burnett, an administrative law judge for the Texas Department of Transportation, issued the decision. The Texas Motor Vehicle Board, which has the final say on the matter, is scheduled to review the ruling June 30.
The decision does not affect the Lincoln bonus program in other states.
Under the program, Lincoln pays dealerships bonuses for things such as scoring well on customer satisfaction surveys and keeping clean stores. Most of Lincoln's roughly 75 dealerships in Texas participate.
A dealership that qualifies for the maximum bonus gets 2.75 percent of the sticker price of each vehicle it sells, according to records in the Texas case. For example, the maximum bonus on a vehicle with a $42,000 list price is $1,155. A dealership that sold 75 vehicles a month at an average sticker price of $42,000 could collect more than $1 million in annual incentives.
Burnett ruled that bonuses tied to prices "cross a line from being merely incentives to becoming subsidies." Lincoln dealerships that are certified to participate in the program get a sales advantage that improperly discriminates against noncertified dealerships, she said.
"Payments calculated in another manner would not present this issue," Burnett added. She proposed several options to Lincoln for revising the way it calculates the dealership bonuses:
Lincoln Mercury spokesman Paul Wood says the company is analyzing the judge's ruling. Lincoln Mercury is considering the alternative payment plans she proposed, Wood says.
The Lincoln case is the first of its kind to reach the Texas Motor Vehicle Board. Ford Division, Mercury, Volvo Cars of North America Inc. and Volkswagen of America Inc. resolved similar challenges to their dealership incentive programs by settling voluntarily with the state board or with their Texas dealers.
You may e-mail Donna Harris at