October 10, 2017 / 4:34 PM / a year ago

U.S. dealer lobby head criticizes automakers' bonus program

DETROIT (Reuters) - The head of the National Automobile Dealers Association (NADA) on Tuesday criticized automakers’ use of so-called stair-step bonus programs, calling them harmful to U.S. auto dealers, to consumer confidence and brand loyalty.

In a speech in Detroit, NADA Chairman Mark Scarpelli said the practice results in “wild discrepancies and fluctuations” in vehicles prices between different dealers, as well as a “lack of consistency, lack of transparency, and lack of explanation” that lead directly to a “lack of trust” in auto dealers and in vehicle brands, he said

Stair-step bonuses are paid out to dealers on an escalating scale as they hit progressively higher sales targets. Dealers that fall short of targets receive nothing.

In the past, dealers and dealer groups have criticized Fiat Chrysler Automobiles NV (FCHA.MI)(FCAU.N), Nissan Motor Co Ltd (7201.T) and Ford Motor Co (F.N) for using stair-step programs.

NADA commissioned a study into automakers’ stair-step programs by Boston-based consultancy Analysis Group, Scarpelli said, whose results it will share with automakers and use them as the basis for discussion.

The NADA, a trade association that represents around 16,500 auto dealers, has an influential presence in Washington, built largely on dealers’ engagement with and support for local members of Congress.

Scarpelli’s speech comes at a time when major automakers and their dealers are coming off a strong run in U.S. new-vehicle sales that lasted from the end of the Great Recession and culminated in record sales of 17.55 million units in 2016.

This year’s sales figures are expected to dip slightly, putting pressure on carmakers and their dealers to sell off high levels of inventory.

At a time the industry likely finds itself in the middle of a “lengthier sales plateau,” Scarpelli said, it is critical for dealers and manufacturers to work together.

In his speech Scarpelli also cited rising concerns from auto dealers about “increasing attempts by their manufacturer partners to run their stores” and mandate investments in expensive, and possibly unnecessary, facility upgrades.

Reporting By Nick Carey; Editing by Steve Orlofsky

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