Can GM’s Dealer Bonus Program Increase Sales?

Chevrolet Cruze Diesel

General Motors (NYSE:GM) has had a good year so far, and it is looking to continue the trend by offering a stair-step program for Chevrolet dealers to increase sales of the 2013 and 2014 Impala, Camaro, Cruze, and Sonic, as well as 2013 Malibu models, according to a report from Automotive News.

Stair-step programs give dealers bonuses for reaching factory sales thresholds. Typically, these types of programs — which give dealers bonuses of up to $1,000 per unit on a certain percentage of models sold above the goals set by GM — don’t include so many different models. But GM has seen great success with earlier stair-step programs.

During the program involving the Cruze, Sonic, and Malibu models in July, Cruze sales shot up 70 percent and Chevrolet’s total car sales increased 31 percent, Automotive News reports. GM is hoping that adding more models to the stair-step initiative will continue to stimulate sales. Not all car dealers appreciate the stair-step programs, though.

According to Automotive News, some car dealers believe that the deals hurt local markets by causing dealers to set artificially low prices, while others say the fluctuations in price are not appreciated by customers, especially any that might have missed a bargain. Dealers were also surprised that the 2014 Impala was included in the program, as the vehicle has gotten great reviews and was voted the top sedan by Consumer Reports.

Overall, Detroit automakers have been giving their Japanese rivals a run for their money since emerging from bankruptcy, even in the compact car arena, which has historically been dominated by Japanese companies. A recent report from Bloomberg said that Ford’s (NYSE:F) Focus and GM’s Cruze are both catching up with Toyota’s (NYSE:TM) Corolla. Data from R.L. Polk analyzed by Ford said that the Focus outsold the Corolla last year, although Toyota disputes that claim. As for GM, the Cruze outsold the Corolla during its 70 percent spike last month.

“The American auto companies are taking the compact segment far more seriously than they used to,” an analyst who spoke to Bloomberg said. “If the Japanese automakers don’t take Detroit seriously in compact cars, it’s going to be at their peril.”

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