Automotive News - February 4, 2008 - (Page 80) 80 • FEBRUARY 4, 2008 INSIGHT GM dealers worry about losing their A-Team Detroit 3 slump makes retaining top salespeople a challenge Jamie LaReau jlareau@crain.com DAN ROCKAFELLOW s General Motors dealers face the prospect of a brutal sales year, many say they fear losing their best salespeople — the socalled A-Team. Declining sales and profits at GM dealerships are limiting compensation for sales employees. That is causing many salespeople to look elsewhere despite incentive programs aimed at keeping them, dealers say. Alan Starling, a former chairman of the National Automobile Dealers Association, owns two GM-brand dealerships in Orlando, Fla. He says he lost five of the 30 salespeople at those dealerships last year — two to competing import-brand dealerships and three to other industries. “Salespeople feel like they’re on the endangered species list,” says Starling, who also is past chairman of Automotive Retailing Today, an industry group that promotes careers in auto retailing. “I’ve had people say, ‘I’ve just got to do something else.’ ” NADA chief economist Paul Taylor calls sales force retention one of the most pressing issues this year for dealers, especially those who sell Detroit 3 brands. Taylor notes that average compensation for salespeople at high-vol- A Springfield, Mo., dealer Lynn Thompson says he realized he needed a better compensation plan to keep top sales employees, so he boosted sales commissions and reduced the number of vehicles a salesperson needs to sell each month to get a bonus. Says Thompson: “The strength in a dealership is your salespeople. They have to be earning a good living.” ume dealerships in major U.S. markets approaches six figures. But at low-volume rural dealerships in the Midwest, he says, the typical salesperson struggles to earn $28,000 a year. commissions and reduced the number of vehicles a salesperson needs to sell each month to get a bonus. Thompson jokes that the new compensation program is “probably too good,” but says it’s worth it. He hasn’t lost any of his top salespeople, and added sales employees last year. “The strength in a dealership is your salespeople,” Thompson says. “They have to be earning a good living. If they’re not, you’re going to lose them.” Mark Rikess, a dealer consultant in suburban Los Angeles, says GM dealers face a “perfect storm” — falling sales, constraints on factory incentives and growing demand for talented salespeople. “The better salespeople have moved into management,” Rikess says. “Those who are still really good at selling and are still selling won’t be lost to the industry. They will just move to other stores.” Dealer Starling has joined a GM loyalty program for his salespeople. They can earn a special $100 bonus for every new car they sell — half from the dealership, half from GM. On Feb. 1, he says, about 15 of his sales employees will get a bonus check for $5,000 to $6,000 each. “I had one or two guys go to import stores because the throughput is greater,” Starling says. “Rumors get out that you can make $180,000 a year. That sounds good to a guy who is struggling to make $52,000.” tomaker gives me a $4,000 rebate to give to the customer.” GM says it is trying to help its dealers. As the company raised prices on most of its 2008 models, it also boosted the dealer margin on most new cars — calculated on the difference between sticker price and dealer invoice — from 10 percent to 10.5 percent. The margin on most trucks rose from an average 12 percent to 12.5 percent. GM increased the number of days it will pay interest costs on new vehicles to 91 from 69. Company executives say they also are prepared to boost incentive spending in 2008 if retail sales slump. These moves, executives say, will help dealers to close sales and make more money — and to share those gains with sales employees. GM dealers welcome the moves, but some say they are not enough to overcome a slow market. The anonymous dealer argues that GM should directly pay a percentage of compensation for dealerships’ sales departments, since the company has a stake in keeping the best sales employees. Public dealership groups that operate large numbers of GM franchises also are boosting pay incentives for sales employees. AutoNation Inc., the nation’s largest public group, has 246 GM franchises. The company pays annual bonuses of as much as $20,000 to veteran salespeople, based on their sales records and seniority, says spokesman Marc Cannon. This year, Cannon says, AutoNation is recognizing its top salespeople of 2007 with trips and other prizes in an “All-Star” program. “That’s one of the reasons we’re successful at keeping people, because it becomes rewarding to stay with us,” Cannon says. Retention wall To hold onto their best salespeople, some GM dealers are Boosting sales commissions Making it easier to qualify for bonuses Sharing benefits of factory incentives Awarding trips and prizes to top performers their competitors — need to change the way they train and pay their sales staffs. “We’ve allowed salespeople to be addicted to floor traffic, as opposed to cultivating business,” Lescota says. “If Jane doesn’t buy today, to hell with her.” Dealers should pay salespeople for taking initiative to go after buyers instead of being “lot lizards,” Lescota says. Commissions should be higher on sales to repeat buyers and those a salesperson recruits than to walk-in customers, he says. Consulant Rikess says that to hire and retain talented salespeople, dealers need to provide better pay and benefits, more training and shorter workweeks. One way to do that, he says, is to shift compensation from top management. “You require less management when you have good people,” he says. “Thus, you get better gross profits.” Paying the best salespeople more may require a greater willingness by GM dealers to show poor performers the door, analysts say. But a Saab dealer warns that short staffing can place too great a burden on the sales employees who remain. “Dealers compromise the equity of the brand and satisfaction of the customer just trying to stay in the black,” says the dealer, who asked not to be named. “Saab has new product coming, and as of now, they won’t have the infrastructure and sales force to sell it.” c Better pay Lynn Thompson sells Buick, Pontiac, GMC, Cadillac and Saab vehicles at his dealership in Springfield, Mo. He estimates the average salesperson in his market makes a salary of $42,000 a year, not counting bonuses. About 18 months ago, Thompson says, he realized he needed a better compensation plan to hold onto top sales employees. He boosted sales gmdealergroupadvertising.com 800-992 2723 Narrow margin Another GM dealer, who asked not to be named, complains that thin margins have thwarted his efforts to hire and keep good salespeople. The dealer says his gross profit on the sale of a $30,000 vehicle is about 4 percent, or $1,200. Of that amount, he says, a salesperson typically would get roughly an 18 percent commission — or about $216. “It’s a joke,” the dealer says. Starling adds: “The only way I can get a $1,200 gross profit is if the au- Traffic addicts Joe Lescota, chairman of the automotive marketing department at Northwood University in Midland, Mich., says GM dealers — as well as http://gmdealergroupadvertising.com http://www.ilocategps.com http://www.ilocategps.com
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