Chrysler confirms end of volume bonus program

Dave Guilford
Automotive News

October 9, 2007 - 5:04 pm ETChrysler LLC will end its controversial monthly volume performance allowance effective Jan. 1, replacing it with a $400-a-car payment that dealers get regardless of sales volume.

Chrysler executives announced the change at a dealer meeting in Las Vegas, dealers said. A Chrysler spokesman confirmed the change.

The new program pays dealers $200 when they are invoiced for a vehicle and another $200 when the vehicle is sold, said Chuck Eddy, co-owner of Bob & Chuck Eddy Chrysler-Dodge-Jeep in Austintown, Ohio, and a dealer council member.

A key feature is that dealers do not have to meet a quota to get the bonus, Eddy said: “If you sell one car, you get the money.”

The volume performance allowance angered many dealers because only those meeting monthly sales targets earned bonuses, which reached $700 a vehicle. Dealers who opposed the program said it pitted Chrysler dealers against each other and gave an unfair cost advantage to dealers who met targets.

Eddy said Chrysler also plans to revise its Five Star elite dealer program to emphasize customer retention.

CEO Bob Nardelli, hired in August by new Chrysler owner Cerberus Capital Management, received a standing ovation after his speech, as did newly hired co-President Jim Press, Eddy said.

“I felt like it was the modern-day version of when Lee Iacocca met with us in 1979,” he said. “It was emotional at one point.”

Another dealer at the Las Vegas meetings said dealers appreciated last week’s moves to idle five assembly plants, reducing inventory backlogs that caused factory-dealer tensions.

That, in addition to the move to kill the volume performance allowance, fired up dealers, the dealer said. “This is the happiest I’ve been in my 30 years as a Chrysler dealer.”