Automakers showing new leniency on dealer money

Automakers last week leapt into action to buoy the bottom lines of retailers feeling the aftershocks of the coronavirus contagion in their now-bare showrooms and service drives.

Faced with a likely new normal of reduced auto- shopping traffic, Nissan, Mercedes-Benz, BMW and others are guaranteeing dealer bonus payouts and relaxing performance objectives.

The brand's finance captives, meanwhile, are helping retailers offset real estate and floorplan expenses.

Showroom traffic at Tim Dahle Nissan Southtowne in suburban Salt Lake City dived 25 percent last week, while service drive business has shrunk 30 percent.

"Each day is worse," the store's operating partner Tyler Slade told Automotive News.

The factory moves are intended to ease retailer stress.

For the first half of the year, Mercedes-Benz USA will guarantee margin and performance bonuses, even if dealers don't fulfill requirements, such as CSI surveys and employee training. For March, the automaker will give dealers a base payout per vehicle sold, even if they don't meet sales objectives.

Hyundai Motor America is paying dealers $400 per wholesale vehicle, regardless of their customer survey scores. Dealer objectives for March also have been reduced.

BMW of North America unveiled a dealer relief package last week that includes new-car and CPO sale payouts, coupled with deferred payments on floorplans, capital loans and mortgages.

Meanwhile, Nissan North America said it will pay dealers $375 per vehicle sold, even if their individual sales objectives are not met.

Slade is hopeful Nissan's financial support will help the brand's retailers "navigate this uncharted territory" safely.

"Now is not the time for objectives," he said.

The swift actions by automakers come as consumer activity across the U.S. shuts down in a nationwide effort to stall the coronavirus contagion. A crashing stock market, meanwhile, has evaporated demand for high-ticket items, such as sedans and crossovers. Auto execs see the writing on the wall and are responding with action and words.

In an email to U.S. dealers last week, Mercedes-Benz USA CEO Nicholas Speeks quoted England's wartime Prime Minister Winston Churchill and rallied his retailers to soldier on despite the "unprecedented" situation facing the auto industry.

With customer traffic into sales and service departments slowing, dealer profitability is under pressure. To help control expenses, several finance captives and lenders are stepping in.

Mercedes-Benz Financial Services will consider deferral of principal payments related to real estate and capital loans for up to 90 days. MBFS also will consider, on a case-by-case basis, postponement of customer payments for up to 90 days.

Similarly, Nissan Motor Acceptance Corp. is lowering dealer floorplan rates and suspending curtailments.

Qualifying dealers also will be able to apply for the cash-flow assistance program, which allows six months of interest-only payments on existing mortgages and capital loans.

Ally Financial, which works with about 18,000 franchised and used-car dealerships nationwide, said through a spokeswoman that the lender is "actively communicating with our dealer partners to support their individual needs."