GM cuts bonuses for dealership sales staff

General Motors has slashed by a third the maximum amount a salesperson can earn in bonus payments from the automaker in its Standards For Excellence program.

The reduction came via altering the criteria salespeople must meet to earn the bonus.

Irate sales staffers are contrasting the move with bonuses some companies are giving employees in the wake of recent cuts in federal corporate tax rates.

"You see companies like Chrysler giving back to their employees, and here you have this so-called American brand, and they're taking away from their employees," said a sales associate at a GM brand store who spoke on condition of anonymity.

Fiat Chrysler Automobiles has said it plans to give a special bonus of $2,000 to some 60,000 American employees after the tax-law changes.

Likewise, dealership group Penske Automotive Group Inc., citing the tax changes, said last week that it will increase its matching contributions to employees' U.S. 401(k) savings plans to 2.5 percent from 1.5 percent. AutoNation Inc. has doubled the match in its employees' 401(k) plans, among other moves in the wake of the tax changes.

In its 2018 SFE Consultant Performance Program, a copy of which was obtained by Automotive News, GM has cut the top amount a salesperson can earn this year to $150 per car from $225 in 2017, assuming retail sales of at least 11 Chevrolet vehicles, seven GMCs or five Buicks in a month. The bonuses are smaller for fewer sales. Bonuses for fleet sales are calculated separately.

The optional SFE program is for Buick, GMC and Chevrolet dealers. Cadillac is not included in the 2018 program after last year's launch of Project Pinnacle, Cadillac's incentive program.

Some dealers worry such a steep cut could lead to higher turnover in sales personnel. Many say they may have to make up the difference. Others disagree, saying that if the dealership pays well, then GM's contribution is merely an extra bonus and losing some of it will have little impact on sales staff morale.

'Meaningful bonuses'

GM declined to discuss the specific SFE program changes, but enrollments in SFE "remain strong," a spokesman said.

"We believe we have the industry-leading program for sales consultants," spokesman Jim Cain wrote in an email to Automotive News. "Both the factory and the dealer put resources behind the things that matter most, which are satisfying customers and growing the business, while giving sales consultants the opportunity to earn meaningful bonuses."

Some other manufacturers offer supplemental bonus programs to dealerships' sales staff, said Jim Appleton, president of the New Jersey Coalition of Automobile Retailers in Trenton, N.J. He could not compare how those programs stack up against GM's, but he noted that dealers have complicated views on automakers paying dealership salespeople directly.

"I have heard a lot of dealers complain about manufacturers creating spiffs for their employees," said Appleton. "They fear the employee will do what's best for the manufacturer instead of the customer and the dealership."

A former Chevy dealer council member said one compelling reason to lower the payout and change some criteria was to shift the emphasis to customer service. "I didn't get the impression from it that Chevrolet was trying to save money," said Rick Cantalini, owner of Vandergriff Chevrolet in Arlington, Texas. "It was more about encouraging behavior in one direction or another."

But at least two GM dealers said GM's decision to slash the payouts is problematic because their salespeople have grown used to that level of compensation and now will want the dealers to cover the difference.

Debate

Cantalini said discussions about the changes with the council were energetic, saying "some thought it was a huge retention area." He disagreed.

"I'm not really a big fan of direct payments from the manufacturer," he said, adding he treats and pays his salespeople well. "Many factory programs have evolutions."

Mike Bowsher, chairman of the Chevrolet National Dealer Council, said despite the decline in potential bonuses for some salespeople, the overall program gives dealers opportunities to make more profit, which will in turn help staff.

"The dealer who executes in 2018 can make considerably more money on SFE than they could in years past," he said. "For the salespeople who may be affected, I certainly trust dealers are aware enough to take care of those folks. I'm certainly not going to lose any of my folks."

Bowsher, owner of Carl Black Automotive Group, in Kennesaw, Ga., declined to go into details on the payouts but said some models can offer dealers roughly double the payouts of previous years.

He also disagreed with dealers who argue the factory shouldn't be paying their salespeople.

"I have been on dealer councils for 16 years, and that argument, I would hear years ago. That goes back to the days of 'you build 'em, we sell 'em.' Those days are dead. They're gone. We have to work together in partnership with General Motors and Chevrolet."

Lucrative

GM's SFE bonuses have been lucrative for many salespeople. A Chevrolet dealer in the South said one of his salespeople told him he "loved" selling Chevrolet vehicles in part because of the $14,000 bonus check he got from GM last year. This dealer, who asked not to be named, said he worries some salespeople will quit. To mitigate that threat, in early January, this dealer switched his pay plan to one based on volume rather than gross profit.

"We tried to take one step away from paying on gross, since there is no gross" profit on new vehicles, said the dealer. "But the guys who come here and stay here and do a big part of the volume and don't turn over are the ones who'll be pissed about [the bonus change], frankly."

In 2017, if a Buick salesman sold five Buicks in a month, GM would pay a $150 bonus for each car. On top of that, the salesman could earn $25 per car to get the customer's email to enroll in an OnStar trial subscription, $25 for getting the new owner's permission to activate GM's subscription-based in-vehicle Wi-Fi and $25 to get the customer's credit card number for an OnStar automatic renewal plan. That brought the total to $225 for each of the five cars he sold, for a $1,125 bonus.

This year, that same Buick salesman who sells five cars, can earn only a $150 bonus per car, bringing his bonus to $750 that month. The salesman still has to enroll the customer in the trial OnStar plan to qualify for any bonus but no longer has to sign them onto Wi-Fi or get their credit card number for the automatic OnStar renewal.

'Scary'

In addition, this year, a salesperson has to meet or exceed the regional customer satisfaction index target each quarter to earn any bonus.

"That's a little scary," said a Buick-GMC salesman who asked to not be identified. He recently sold two diesel pickups that shortly afterward broke down because of extreme cold weather.

"If you're only delivering five Buicks and seven GMCs and you have two or three bad reports due to product failure, you're in trouble," he said.

This salesman sold 266 new cars last year. Even if he matches that volume, he will make $12,000 less in annual compensation under GM's new plan, he said. He added, "Everybody here depends on that additional money for their livelihood."

Salesman Joe Faruolo, 60, said he will earn $7,000 less in bonuses this year even if he matches his sales volume last year. He will either cut back on his spending or "sell a hell of a lot more cars," said Faruolo, who works at Freehold Buick-GMC in Freehold, N.J.

"The people on the ground who push the car, the guys in the trenches — [GM CEO] Mary Barra is going to lose them," Faruolo said.

But a Midwest dealer who sells multiple GM brands said dealers should not fret about losing talent. This dealer said he pays generously, and if GM's bonus-program cuts drive off a salesperson, then that person was not happy or paid well by a dealer to begin with.

"I say, 'Go to work for a Chrysler store then,' " said the dealer, who spoke on a condition of anonymity. "If you're working as hard as you can, and you can't make the money you need, then you have to take your skills and go somewhere else."

Michael Wayland contributed to this report.