It's time to stop the stair-step madness.
Dealers report that some manufacturers have ramped up their use of stair-step incentives. Several major retailers, including some of the largest dealership groups in the country, say stair-step programs are worse than they were last spring, when the programs set off renewed debate about the practice.
For example, AutoNation Inc. reports that more manufacturers are involved this year, and that "the targets are getting more and more irrational."
Dealers complain that the tiered sales targets being given to dealerships to earn escalating stair-step bonus money are erratic. Some stores may have easy targets, but others have targets that they call impossible.
Manufacturers like the programs because they move the metal. But the programs cause major disruptions as stores chase bonus payments, which can be huge. They wreak havoc on dealerships' front-end new-car margins. And customer satisfaction suffers because buyers get aggravated when they pay significantly more than someone else purchasing near a stair-step deadline, when retailers may slash prices below cost to meet targets and earn retroactive payments.
Venting his frustration in a story in this issue, one Volkswagen dealer says he's weary of hearing how well VW is doing because VW dealership profitability "is in the toilet."
The time has come for automakers to find a more rational way to help dealers sell cars and trucks.