Auto dealer group pushes back on two-tier pricing, mandatory facility upgrades

Publish Date: 
Oct 23, 2012

DETROIT, Mich. - Bill Underriner, chairman of the National Automobile Dealers Association, is urging automakers to support a level playing field for dealerships of all sizes. And he cites two challenges that also have been apparent in the powersports dealer community.

“Two-tier pricing and mandatory facility upgrades are symptoms of a bigger overall problem—manufacturer intrusion into dealers’ businesses,” Underriner (shown here) told the Automotive Press Association in Detroit. “NADA wants the automakers to stop unfair practices.”

The auto dealer association earlier this year created a special dealer task force to focus on the fairness of stair-step programs, also referred to as two-tier pricing, a manufacturer-to-dealer incentive tied to sales goals.

“The history of our industry is littered with automaker attempts to impose one-size-fits-all programs on dealers. These efforts at top-down control almost always fail,” added Underriner, who himself is a multiline automobile dealer in Billings, Mont. “We favor lawful, equal and fair treatment by a manufacturer for all its dealers. Unfortunately, history shows that, at times, manufacturers create incentive programs that favor some dealers over others.”

Underriner cited the “incredible diversity among dealer businesses” as a reason why these programs are often unsuccessful. 

“There is equal diversity in local market conditions and customer preferences across the country,” he said. “Distant corporations simply cannot understand or respond effectively to these differences. We know our customers’ preferences and local market conditions better than anyone – certainly far better than a corporation with headquarters thousands of miles away.”

NADA is also studying factory-mandated dealership renovation programs to analyze the return on investment. These programs, the association said, often require an automotive dealer to invest millions of dollars.

(Recently, Fletcher's Harley-Davidson in Florida closed after 45 years in business, citing struggles to comply with mandated facility upgrades.)

“[Auto] manufacturers that build flexibility into the programs tend to have more success,” Underriner said. “When programs are not flexible and don’t consider local conditions, there is a much higher likelihood of pushback and controversy.”

NADA’s first study recommended that automakers get more dealer input into these programs early in the process. “This is when dealers can help automakers shape a program that’s well received by dealers at large,” Underriner added.

Posted by Mary Slepicka