The parallels between an automaker's reliance on stair-step incentive programs and an individual in the throes of a substance-abuse problem are uncomfortable on many levels. But if Nissan is truly preparing to end its long, heavy use of a profit-sapping, morale-draining, dealer-weakening sales incentive system, we say great.
The first step toward recovery is realizing you have a problem — and in dealer survey after dealer survey, it's been obvious for years that Nissan and its dealers have a serious problem.
We have long opposed automaker stair-step incentive programs in large part because of the perverse impact they have on vehicle pricing and profitability. There is no logical reason that two franchised dealers should pay different prices when buying the same product from the same factory just because one of the two happened to hit a seemingly arbitrary sales target over a given period.
Such schemes undermine the franchise system because they pit franchisees against one another on unequal footing from the factory, rather than allowing them to compete fairly based upon factors that are unique to their individual dealerships. Like illicit substances, they have a corrupting influence over time, driving business decisions that don't make rational sense.
Stair-step disciples argue that the programs efficiently align automakers' goals with those of their dealer networks. But really, it's not so much an alignment as it is an imposition of the automaker's goals upon its dealers.
Yes, individual dealers are free to jump off the stair-step program and focus on their own profits and losses, but as dealers have learned repeatedly, rejecting an automaker's stair-step programs usually leads to threats about failing to hit a minimum sales responsibility, potentially putting the franchise in jeopardy.
Nissan over the last several years has been an especially tragic case of abusing stair-step incentive programs to chase an elusive, and probably unsustainable, U.S. market share goal for the Japanese mass-market brand. It was accompanied by large factory forays into daily rental fleet sales, placing additional downward pressure on vehicle residual values and making it harder for Nissan dealers to compete against other brands.
It's encouraging that Nissan CEO Hiroto Saikawa and North American Chairman Jose Luis Valls want to change the way the brand retails its vehicles in the U.S. A decision is long overdue.
Every journey of recovery begins with a single step, and we're glad Nissan is close to taking it.
