LOS ANGELES -- Volvo Cars of North America has scrapped a new dealer discount program that paid dealers an extra 2 or 3 percentage points for improving their dealerships.
The problem is that struggling dealers are in no position to make improvements called for in the Volvo Retail Experience program, said Tony Nicolosi, who was named acting CEO in October.
The brand's U.S. sales continue to fall and there is little in the product pipeline over the next two years.
Nicolosi said Volvo is working on a new facilities program that will be unveiled at the National Automobile Dealers Association convention next month in New Orleans.
Volvo will revert to its previous fixed dealer discount of 14 percent on new vehicles. The dealer discount is the difference between the wholesale price and the sticker price, expressed as a percentage of the sticker price.
Under the variable dealer discount program that took effect with the 2014 model year, dealers could have earned up to 17 percentage points on the S60 sedan and XC60 crossover and up to 16 percentage points on other 2014 models. The program was to have run for the next three model years.
Dealers lobbied Volvo to drop the new program, which besides dealership improvements included bonuses for sales goals and increases in customer service scores.
"Our brand and the dealer profitability is not in the position right now to be making these investments," Nicolosi said last month at the Los Angeles Auto Show. "We can't be fighting the dealers now."
Nicolosi said the average dealership has to spend $1.2 million to $1.5 million to meet the Volvo Retail Experience requirements.
"We need to get the throughput, brand consideration and dealers' profitability up," Nicolosi said.
Some dealers upgraded their stores this year and will receive payment in compensation, he said, but did not give details or say how many dealerships had made changes.
Through the first 11 months of 2013, Volvo's sales declined 9 percent in a market that has risen 8 percent.