Flexible compensation lets staff choose
Shrinking profit margins as well as the need to attract "risk-averse" young employees are prompting some dealerships to shift — at least in part — away from commission-based compensation for sales staff, industry experts say. Fleming Ford, head of people and performance at ESiTrends, a Florida consultancy that has worked with the Trillium Automobile Dealers Association (TADA) in Ontario, said the shift to a salary component allows dealerships to compete for talent with other forms of retail. "People don't like risk anymore," Ford said, referring to millennials and their younger cohorts, Generation Z. "When you don't feel safe, you can be coming across as desperate and not providing that great customer experience dealers are trying to provide."
Such was the motivation for Sue Gubasta, dealer principal at Mississauga Toyota in the Greater Toronto Area, who about four years ago switched the dealership from straight commissions to a salary-plus-bonus plan. Compensation includes incentives on all aspects of the sales process, from customer satisfaction to referrals on financial products and a percentage of gross on every vehicle sold. "If you're worried about the money, you're not doing the job at hand," Gubasta said. "The sales staff loved it. It just provides them with stability for the slower times without it being a draw on pay." The change has made it easier to recruit staff and dramatically cut turnover, Gubasta said. "It's much easier to recruit. ... [There's] peace of mind so they can focus on selling as it is like a safety net," she said. "Since we moved to their pay plan, 80 per cent of our sales staff has stayed with us." That's much lower than the annualized turnover rate of about 50 per cent among sales staff, cited in a 2018 dealership workforce study commissioned by TADA. Still, not all staff made the switch, Gubasta said. "One of our top advisers, when we asked if she wanted to go to salary plus commission, said, 'Can I just stay with straight commission?'" she said. "For us, it's not either-or. We want to give them that flexibility."
The costs are about the same as those incurred under the previous commission-based model, Gubasta said. "We have to make sure we stay within the pay structure," she said.
'Real money' in commissions
One dealership group is using a hybrid approach to drive the recruitment of new staff who might be scared off by a commissions-only structure. Zeyad Rafih, vice-president of Windsor, Ont.-based Rafih Auto Group, switched from a commission structure to salary plus volume in 2014 but has since backtracked. Rafih Auto instead has moved to a system where sales staff are paid salary plus a percentage of their sales to start but transition after six months to straight commission. "Anybody who's any good only ever wants to be paid straight commission," he said. "Commission is where you make the real money." Rafih said his top sellers move about 40 to 50 cars a month and annually earn $200,000 to $300,000 in commissions, which are based on a percentage of the dealership's profit margin on each deal. Rafih Auto Group owns and operates 20 dealerships representing 30 brands in Canada and the United States.
At Winnipeg-based Crown Mazda, General Manager Mark Carver said he pays sales staff a straight commission. It's the best way to give employees an incentive to prospect for new business, rather than wait for customers to walk in the door or click through on the website, Carver said. During slow months, the dealership will continue to pay sales staff, but those earnings come out of future commissions, he said. "If you offer someone X amount a year, I'm not sure what you get out of it," Carver said. "They see it as a normal job, not as a career.
"Typically, a good salesperson would say, 'Why would I want to work in that environment?' "
While Ford of ESITrends said shrinking margins — on which commissions are based — are a major factor in moving to a salary system, Rafih argued tighter profits make it more important to have sales staff hustling for new and repeat business. That's a key reason that Carver's Crown Mazda pays a flat commission per sale. While hard work earns more sales and more commissions, grinding a higher price out of a customer won't, he said. "It makes it more pleasurable for the consumer," Carver said, because the sales staff can focus on a smooth transaction. Gubasta said a key benefit of her switch to a salary is less infighting over deals on the sales floor. She doesn't think it has made any difference in staff commitment to behindthe-scenes tasks that don't immediately lead to sales. "Every activity they need to perform is part of the sale," Gubasta said. "Not my job ... everything is part of the job. Whatever it takes to make sure we take care of the customer."
Source: Automotive News Canada
NISSAN, RENAULT, MITSUBISHI MOTORS AGREE TO FORM NEW VENTURE
The Nissan Motor Co, Renault SA, and Mitsubishi Motors Corp alliance has agreed to form a new company focused on research and development of advanced automotive technologies, Kyodo News said. The three companies will announce a concrete plan in January, Kyodo reported on Sunday, citing people familiar with the matter. The new venture also aims to strengthen the alliance, in which relationships have frayed since the arrest and ouster of former CEO Carlos Ghosn, according to the report.
Source: The Detroit News
ELECTRIC MUSTANG (FASTBACK OR CONVERTIBLE) IS ONLY A MATTER OF TIME
Mustang Mach-E chief engineer hints at wider EV lineup.
Some Mustang fans are still getting used to the idea of a Mustang-branded midsize electric crossover, but an electric Mustang coupe or convertible may not be far on the horizon, Motoring reports. The scalable EV platform that will underpin the Mustang Mach-E next year can be shortened or stretched to support a number of bodystyles in rear- and all-wheel-drive configurations, including those of smaller and lighter passenger cars. Ford showed off just such a thing at SEMA last month, in the form of the heady, 900-hp Mustang Lithium concept. Perhaps it's no coincidence that Ford wanted to showcase a traditional Mustang right after the reveal of the crossover EV, which was met with just as much fanfare as skepticism from more orthodox Mustang owners—let's put it that way. When asked about the Mustang Lithium concept, Mustang Mach-E chief engineer Ron Heiser indicated to Motoring that the Mach-E's platform will underpin several EVs, some of which will wear the Mustang badge and some that won't.
"I can't speak to that (Mustang Lithium concept). But I think if you look out in the future—who knows what timeframe that is—the market is eventually going to roll over to EVs," Heiser told Motoring.
The bigger question is at what point sales of an electric Mustang could overtake sales of the gas-engined model; Ford is widely expected to field an electric model to be sold alongside a gas-engined one, as part of a greater Mustang-badged lineup of vehicles. "It doesn't need to have a Mustang name on it, but we chose the first vehicle on this platform to be a Mustang," Heiser said in the same interview, suggesting there is a greater variety of EVs in the pipeline that will use the Mach-E platform.
In any case, it's too early to worry about the departure of the gas-engined Mustang: The next model will use the rear-wheel-drive Explorer platform that arrived earlier this year, and is expected to be offered in hybrid form. So the gas-engined Mustang will be with us for a while. But with the Mustang Mach-E, Ford now also has an EV platform that could be scaled down a bit to accommodate a coupe body, something Heiser hinted at in his comments to Motoring. It's difficult to picture a fuller lineup of EVs from Ford in the first half of the next decade without a coupe, especially now that Mustang is gently shifting to a performance sub-brand status.
It's best to start getting mentally ready now for having a choice of a gas or electric Mustang at a Ford dealer in the 2020s.
MORE VW DIESEL NEWS
German public prosecutors raided the Wolfsburg headquarters of Volkswagen on Tuesday in the latest investigation into the carmaker's diesel emissions scandal. Prosecutors said investigators aimed to confiscate documents. Volkswagen, which admitted in 2015 to cheating U.S. emissions tests on diesel engines, said it was fully cooperating with the authorities, but viewed the investigation as unfounded. Volkswagen said the raids were linked to an investigation into diesel cars with engine type EA 288, a successor model to the EA 189 which was at the heart of the test cheating scandal.
CARMAKERS SHED 80,000 JOBS AS ELECTRIC SHIFT UPENDS INDUSTRY
It's turning out to be one of the worst years ever for autoworkers across the globe amid shrinking demand and a tectonic shift in-vehicle technology, with Daimler AG and Audi announcing almost 20,000 job cuts in just the past week. All told, carmakers are eliminating more than 80,000 jobs during the coming years, according to data compiled by Bloomberg News. Although the cuts are concentrated in Germany, the U.S. and the U.K., faster-growing economies haven't been immune and are seeing automakers scale back operations there.
NEW AIRBAG RECALLS
Takata Corp., the auto-parts supplier that went bankrupt after its airbags spurred the largest-ever recall, told U.S. safety regulators that another 1.4 million U.S. vehicles need to be repaired over a potentially deadly defect. Inflator devices Takata supplied to five of the world's biggest car manufacturers may absorb moisture that could either cause the airbag to rupture or under-inflate, according to a notice published on the National Highway Traffic Safety Administration's website. The recall involves components produced from 1995 through 1999 and sold to Volkswagen AG's Audi, Toyota Motor Corp., Honda Motor Co., BMW AG, and Mitsubishi Motors Corp.
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