NADA blasts automakers on facility programs, stair-step incentives

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The chairman of the National Automobile Dealers Association today criticized manufacturers for “intrusion” into dealers’ operations by requiring facility renovations and creating two tiers of pricing for retailers.

“Two-tier pricing and mandatory facility upgrades are symptoms of a bigger overall problem: manufacturer intrusion into dealers’ businesses,” NADA Chairman Bill Underriner said during a speech to the Automotive Press Association in Detroit.

“The history of our industry is littered with automaker attempts to impose one-size-fits-all programs on dealers,” he said. “These efforts at top-down control almost always fail.”

Underriner reiterated NADA’s view that stair-step programs, which pay dealers escalating bonuses as sales targets are reached, hurt brand values and harm dealers’ relationships with customers. Dealers who aren’t paid the bonuses are at a disadvantage relative to dealers who receive them, creating an unlevel playing field, NADA says.

Underriner, who sells Buick, Hondas, Hyundais and Volvos in Billings, Mont., said many manufacturers that curtailed stair-step incentives after the recession have revived the practice over the past year.

NADA assembled a task force this spring to examine the controversial two-tiered pricing and factory image programs. Underriner said the group is developing a list of actions to take on the stair-step issue. An ongoing advertising campaign opposing stair-step programs is an outgrowth of that effort, he said.

On the facilities issue, Underriner said the task force by year end will have developed metrics to measure the return on investment in factory image programs.

“We’ll look at actual dealer data,” said Underriner. “We’ll talk to dealers who took on facility image programs, and to some who did not.”

Separately, Underriner said NADA would not join in legal action by state dealer associations against Tesla Motors Inc. Dealer associations in Massachusetts and New York are suing Tesla, contending the electric-vehicle maker’s factory-owned stores violate franchise and consumer protection laws.

Challenging Tesla will be done “on a state-by-state basis,” Underriner said. But, he added: “We will help them. We’ve got a whole mess of lawyers in Washington who work on state franchise laws.”

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