GM hints at dealer bonus redesign
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May 11, 2015 01:00 AM

GM hints at dealer bonus redesign

Batey: Makeover program ending, but not rewards

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    Editor's note: GM has corrected the U.S. dealership count given for the original version of this story. The correct figure is 4,300 dealerships. 

    DETROIT -- General Motors is in the home stretch of what executives call the most extensive makeover of a dealership network in automotive history.

    Though the requirements of the program rankled many dealers early on, the "multibillion-dollar investment" by GM over the last five years has "changed the face of our brands across the nation," Alan Batey, GM's president of North America since January 2014, told Automotive News last week.

    "We've gone, in my opinion, from being the worst to being the best in our facilities," said Batey.

    But the program's scheduled expiration next year raises financial uncertainty for most of GM's dealers, who have come to depend on quarterly bonuses that are tied partly to making store improvements. Those bonuses can earn big-volume stores in excess of $1 million annually. Many are waiting to see how GM tweaks the program for the future.

    "There's no question that it's become an important part of the overall bottom line," said Steve Rayman, owner of Steve Rayman Chevrolet in Smyrna, Ga., near Atlanta.

    Batey hinted that there will be a successor program but said details are being hashed over with GM's executive dealer board, a group of four dealers representing each GM brand.

    "We're going to continue to reward those dealers who are providing a world-class ownership experience that drives customer retention," Batey said.

    Under the current incentive program, called Essential Brand Elements, or EBE, GM pays qualifying dealers $300 to $700 for each vehicle they receive from the factory, depending on the brand. Improving or building new stores is by far the biggest hoop dealers have had to jump through to qualify. But they must hit targets in other areas too, including employee training and digital-sales strategy.

    GM has about 4,300 U.S. dealerships. About 57 percent of them, or about 2,450, GM says, have renovated or built new stores. Another 12 percent are under construction. That means about two-thirds of GM dealerships -- representing an estimated 83 percent of the company's U.S. retail sales volume -- will soon be freshly made over.

    By the time the program expires in 2016, GM will have spent more than $5 billion over seven years, according to an Automotive News estimate based on GM documents detailing the program.

    But with so many dealers having updated or built new stores, what's left to do that would warrant a successor program?

    Brad Sowers, chairman of the Chevrolet National Dealer Council and a member of GM's executive dealer board, said GM executives have committed to an EBE 2.0 and details are being worked out. Sowers, owner of Jim Butler Chevrolet in Fenton, Mo., near St. Louis, said there will be no shortage of ways that dealers will be asked to invest in their businesses in coming years.

    High-tech digital displays are one example of a big-ticket item that dealers might be asked to install, he said. Employee training requirements could become more stringent as connected-car technology and autonomous features permeate vehicles. Dealers will be expected to keep their new showrooms and service departments up to date, he said.

    "There won't be anything that costs millions of dollars, but there are a lot of things we will want to do to continue improving the customer experience and driving market share," said Sowers. "GM is saying 'We'll keep you in this EBE mode because we want you guys out there knocking out the competition.'"

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