VW dealers battle staff poaching

Since last fall, Volkswagen dealers have tried to keep it business as usual despite the German automaker's revelation that it cheated on its U.S. diesel emissions tests.

To do that, dealers have had to tweak operations to not only keep customers, but keep employees, too.

"Whenever something like this happens, the focus is always on maintaining a good sales force," said Chip Maher, principal of dealership 20 Group consulting firm CWM Consulting in Richmond, Va.

VW's scandal is a black eye to the brand and has hurt its new-car sales. It's forced a halt to its diesel vehicle sales, and dealership values have plummeted to zero among some buy-sell advisers. Many VW dealers say that makes hiring and retaining sales staff especially challenging.

"Without a doubt, it's a little tougher attracting people to Volkswagen right now," said Maher. "There's a squeeze on hiring until the throughput starts coming up."

Through July, VW brand's U.S. light-vehicle sales were down 14 percent from a year earlier to 177,772. That's below an industry gain of 1.1 percent, according to the Automotive News Data Center.

In a statement, Volkswagen Group of America said that since the diesel cheating scandal become public, it has "maintained a regular dialogue with dealers and the Volkswagen National Dealer Advisory Council to support their needs." VW declined further comment on whether it was helping dealers retain sales staff.

The decline in diesel vehicle sales has dented some VW salespeople's pay, consultants say. Diesels were particularly lucrative for salespeople simply because of supply and demand, said Danny McKenna, owner of McKenna Automotive Group in Norwalk, Calif. 

"A salesperson can make an extra $200 to $250 on their voucher because the discount isn't as big as it is on a gasoline car," McKenna said. 

For every diesel vehicle McKenna stocked, he carried seven gasoline cars. Yet diesel vehicles made up about 20 percent of new-car sales at each of his two VW stores. 

"My supply of diesel was low, so if you wanted one, you paid the price," McKenna said. 

"Also, there were often less rebates and incentives on diesel, so people paid closer to the window sticker."

Dealer consultant Don South said 20 to 40 percent of new-car sales for VW dealers in his 20 Groups are diesels. South is National Automobile Dealers Association 20 Group manager in Pensacola, Fla.

South and Maher say their 20 Groups have not specifically discussed the impact of VW's troubles on salespeople's pay. But Maher said that "total sales commissions are down because the total sales volume is down in Volkswagen in general."

To offset some of that decline, many VW dealers have increased used-car inventory by 15 to 40 percent above a year ago. They often allow sales staff to sell both new and used vehicles to boost their commissions, dealers and consultants say.

Those who have increased used-car inventory say they have seen an increase in their used-car sales, too, helping stave off personnel changes and profit losses.

But sometimes even that's not enough. Recently, two dealers in South's NADA 20 Group said they were "poached pretty heavily" when a rival dealer called their salespeople asking, "Do you want to continue to work for a manufacturer who's been less than honest?"

A few salespeople and a manager left to go work for the rival, he said.

"That's the tactic some dealers are using to poach people," South said. "The pay probably wasn't the issue if the rival was playing the "honesty card' to get them to come over."

Those VW dealers struggled to replace the departed staff, he said.

Sales staff turnover at many VW dealerships has not been "a huge problem," South said.

He added, "It is a huge problem for the dealer it happens to, though."

Dealer Joe Esposito has had "minimal" turnover in sales personnel after the scandal broke, in part because he acted quickly to mitigate damage, he said.

"We were initially very, very concerned when it broke, but we chose to say, "Let's talk to the managers about the holes in their game; let's not talk about VW's holes in its game,'" said Esposito, managing partner of Camelback Volkswagen in Phoenix. "We're going to sell cars and put our emphasis solely on the sales process."

Camelback VW sells about 2,500 new and used cars a year. Diesel vehicles were about 19 percent of new-car sales, he said.

Last fall, Esposito started hiring "green peas" -- people from outside the industry. He charged each manager with making one hire a month so that the dealership kept growing.

"We have had a 97 percent retention rate on the people we've hired since the scandal broke," Esposito said. "We've done that by focusing on training them to follow the sales process" rather than focusing on VW's scandal.

Shortly after the scandal broke, Esposito devised a way to keep salespeople focused on sales by removing the burden of handling angry customers affected by the diesel problem.

In November, he created a full-time customer-relations manager job. He hired an existing salesperson to do it and converted a finance and insurance office into a room to talk to diesel customers.

"We took those customers out of the showroom," Esposito said. "They were shuffled into a back office rather than have any discussions or inflammatory conversations on the showroom floor."

At Auburn Volkswagen in Auburn, Wash., near Seattle, dealer Matthew Welch also hired a customer-relations manager to handle diesel customers.

Auburn Volkswagen salesman Matt Reynolds said frustrated customers came in "fairly frequently" at first, and the customer-relations manager was "instrumental" in keeping discussions with them separate from the sales team.

Esposito also credits himself with making "smarter hiring decisions." For example, about 18 months ago, he started using personality profile tests to identify good workers.

He also has a Mazda and a Subaru store. Esposito uses VW as the training ground for new hires to advance in the group.

He pays a salary during training, then eases new hires into a commission plan that pays bonuses on volume and gross profit. Most of his VW sales staffers make $3,000 to $5,000 a month. Some earn $8,000 to $10,000.

Finally, he started an annual employee survey and acts on staff feedback. In the end, Esposito believes, "If they're happy, they'll stay, even with the crisis happening. Why would they want to leave for the unknown?"