ORLANDO, Fla. -- Volkswagen is developing a performance-based dealer incentive system that rewards dealers who upgrade stores and hit sales targets and consumer satisfaction goals.
Adrian Hallmark, executive vice president of Volkswagen of America, says the new program will be more result-driven than VWoA's previous program, which expired last year. VW expects to spend the same amount but spread it out differently.
"We will be distributing the money in a different way," Hallmark told Automotive News in an interview at the National Automobile Dealers Association convention here.
"If we sell the same amount of cars, we will spend the same amount of money. But the high performers will probably get more money than they get today. And the ones that don't show improvement will get less -- so it's a real meritocracy. It is totally result-driven."
The program, which will be ready in the second half of 2006 and will be called the Chairman's Challenge, is fueled by VW's need to increase volume and improve quality ratings, says Hallmark. The name comes from the challenge to improve laid out by Wolfgang Bernhard, head of the VW brand worldwide.
Dealers say the program could affect payments that today range from $350 to $400 per vehicle. Hallmark hasn't given dealers any concrete details, said Bob Grace, chairman of the dealer council and owner of Southpoint Volkswagen in Baton Rouge, La. A conference call scheduled to discuss proposals with the dealer council on Wednesday, Feb. 15, was postponed until this week.
The previous program dictated more than just customer satisfaction -- things such as telling dealers they had to have a baby-changing station in the bathroom and no overhead paging system. "These were part of the standard that expired," Grace said.
"Adrian wants to tie it primarily to CSI and SSI," he said. "How he ties all that to reward and recognition, I don't know yet."
VW was third from the bottom in the 2005 J.D. Power and Associates Customer Satisfaction Index and eighth from the bottom in the sales satisfaction index.
Hallmark said he's skimping on the details because "we haven't got it all signed up yet." He expects to negotiate the Chairman's Challenge with dealers in the coming months.
With sales far from where they were even a few years ago and low quality ratings, there is much amiss at VWoA. But its new chief said it can all be fixed.
Hallmark said the dealer issue is one of the first he has decided to tackle. But VW is still suffering from quality problems with older models and low customer satisfaction scores, he said. On top of that, Hallmark said he inherited a company that replaced 70 percent of its product -- by volume -- in the past year.
One thing is clear, according to Hallmark: Dealer performance and profits have to improve. He said dealers had an average return of sales of less than 2 percent last year: "Many dealers aren't making a profit."
You may e-mail Diana T. Kurylko at [email protected]