DaimlerChrysler AG's Chrysler Group told dealers Wednesday it is adding cash incentives on several new vehicles and added an unusual twist -- bonuses of up to $15,000 for sales managers whose dealerships meet or exceed April sales volume targets.
In a memo from Chrysler to its dealers obtained by The Detroit News, Chrysler said the incentives were "designed to close out April with increased momentum."
Sales managers will become eligible for a cash bonus if their dealership reaches 100 percent of its goal for April established under the automaker's volume performance allowance (VPA) program. The bonuses will be higher if the dealership hits 115 percent of its goal, according to the memo.
Chrysler's VPA program, a source of controversy among dealers, already doles out up to $500 per vehicle to dealerships that achieve VPA goals. In April, though, sales managers can also earn extra money. At smaller dealerships, sales managers can earn $3,000 for reaching the goal and $5,000 for exceeding it. The bonuses are higher for medium,-sized dealerships -- $5,000 and $10,000 -- and large dealerships -- $10,000 and $15,000.
Dealer reaction to bonuses for sales managers was mixed.
"My sales managers are so happy, they were doing high-fives," said Alan Helfman, owner of River Oaks Chrysler-Jeep in Houston.
However, Chrysler dealer Jim Quinlan, who owns stores in Knoxville, Tenn., said offering bonuses to sales managers could backfire and eat into profits.
"It encourages bad behavior," he said. "The danger when the money is this significant is sales managers begin to make decisions that aren't in the best interest of the dealership to make their bonuses. They sell vehicles below invoice or give up too much on the trade in. And the dealer ends up losing out."
Added Ken Papa of Papa's Dodge Jeep in New Britain, Conn.: "I am appalled that Chrysler's management would think that the direct payment to dealership employees is a positive step toward returning the dealers to profitability and help mend dealer factory relations. This is a disastrous move by the factory that will erode dealership grosses and undermine the dealer/owner's ability to manage their own business."
Ken Zangara of Zangara Dodge in Albuquerque, N.M., disagreed.
"It's a brilliant move," he said. "If a (sales manager) makes a bad decision, that's the dealer's problem for not supervising enough. I know my people aren't going to make any bad decisions."
John Berry, a sales manager at Hollywood Chrysler Jeep, said the prospect of a bonus shouldn't lead to a flood of unprofitable sales.
"We're still managers," he said. "We're not going to cut our nose off to spite our face."
But Berry said the incentive should motivate sales managers to move the metal. "It doesn't matter if you're the paperboy or Donald Trump, you're money motivated," he said. "This is merely an enhancement to help everybody get to the end result of getting what they want."The targets are hard to obtain and the bonus will be divvied up among the two to four sales managers who typically work at dealerships depending on its size.
Many Chrysler dealers were hoping the automaker would do away with the VPA program altogether because they say it creates an uneven playing field for dealers that can't meet the goals. But Chrysler said earlier this month it was keeping the VPA program after reviewing it.
Also Wednesday, the automaker told dealers it was adding cash incentives of $500 on several vehicles including the Chrysler PT Cruiser, PT Cruiser convertible, Pacifica (six-passenger version only) and 300 sedan. The company also added $500 on the Dodge Durango and Jeep Grand Cherokee SRT8, and Jeep Commander and $1000 on the Dakota pickup.
The rebates, which run through April 30, come on top of all existing sales incentives on the vehicles. In addition, the company is offering a $3,000 incentive for Durango lease customers who want to lease another Durango.
Chrysler Financial also announced a program where buyers with top-notch credit can buy a vehicle and not make a payment until Labor Day.
Chrysler's sales were down 4.4 percent through March of this year. Quinlan said the new cash incentives on vehicles and the sales manager bonus program indicate to him that Chrysler is struggling this month. "April sales must not be doing very well," he said.