Sept. 5 (Bloomberg) -- Ford Motor Co., moving to support its limping Lincoln brand, has begun using a bonus program that car dealers criticize as confusing and unfair.
Such dealer-bonus programs, often called stair-step incentives, involve Ford paying dealers more cash per model as they cross sales thresholds. They are in effect this month in markets such as New York and Washington, D.C., according to memos distributed to dealers. The incentives available are as much as $1,500 per sale.
Stair-step incentives have been criticized by dealers. The temptation to win such bonuses can lead to steep discounts or generous trade-ins, and the programs can result in a drop-off in sales once they expire. While Ken Czubay, Ford’s vice president of U.S. marketing, sales and service, said yesterday that Ford doesn’t run stair-step programs, sales analyst Erich Merkle said the company is using them selectively.
“There are some inherently unfair aspects of stair-step programs,” Don Chalmers, the owner of Ford and Lincoln dealerships near Santa Fe and Albuquerque, New Mexico, said in a telephone interview. “They’re confusing to the market, they’re not necessarily good for customer satisfaction, and when you see a burst of sales at the end of a stair-step program, there’s always a payback. Right after that, the sales dip.”
Ford is using stair-step incentive programs on “selective legacy vehicles” for Lincoln, Merkle said. The programs in New York and Washington are for the Lincoln MKS full-size sedan and MKX and MKT utility vehicles.
Merkle said the company was using stair-steps after Dearborn, Michigan-based Ford’s monthly conference call with analysts and reporters, during which Czubay was asked by an analyst if Ford is running stair-step programs.
“We do not do that,” Czubay said. “The feedback from our dealers is we don’t believe that’s a good tool right now, and we don’t have to resort to that.”
In the New York and Washington regions, Lincoln has stair-step incentives for the 2013 model year MKS, MKX and MKT. A dealer earns $1,000 each for selling two to five vehicles, $1,250 for six to 10 deliveries, and $1,500 for retailing 11 or more.
The Lincoln program began yesterday and runs through Sept. 30. The cash incentives are retained by dealers and can’t be passed along to the customer, according to the memos.
Lincoln deliveries fell 6.4 percent this year through August to 53,399. Ford sold 20,901 MKZ mid-size sedans, only two more than it did during the year-earlier period. The redesigned car is the first of four new models in four years that the company has pledged will begin to turn around the brand.
Ford also is running dealer bonus cash programs tied to many of its namesake brand vehicles. In the Miami and Dallas markets, dealers can offer discounts to customers based on the number of Ford vehicles they sold or leased at retail from Aug. 1 through Sept. 3.
Dealers who participate can offer incentives of as much as $500 for 2014 Ford vehicles in the Miami area and $750 in Dallas from yesterday through Sept. 30.
U.S. car and light truck sales in August surged 17 percent to 1.5 million units, the most since May 2007, according to researcher Autodata Corp. That exceeded the 14 percent rise to 1.47 million that was the average of 10 analyst estimates in a survey by Bloomberg News. The sales rate for the month was 16.1 million, the most since October 2007, Autodata said.
Ford’s total deliveries surged 13 percent this year through August, outpacing the 9.6 percent gain for the industry. The automaker boosted its market share by 0.4 percentage point to 16 percent.
To contact the reporter on this story: Craig Trudell in Southfield, Michigan at email@example.com
To contact the editor responsible for this story: Jamie Butters at firstname.lastname@example.org