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Dealers cry foul over Toyota bonuses

Tensions are rising in the Toyota retail network after the carmaker announced a new bonus structure that seriously impacts on dealers’ ability to make money.

The effect of the new scheme, which now centres on volume bonus payouts of 1.5% instead of standards-based bonuses of 4.4%, has been immediate, according to composites seen by AM.

They show that in January, traditionally the Toyota network’s third strongest financial trading month, dealers only averaged breakeven.

“This is the first time we have ever been as low as breakeven in January,” one Toyota retail boss said. “It says to me that the network will lose money this year.”

He added: “The new margin reconstruction makes it impossible for dealers to maintain profits, even at last year’s low level (0.7% average). We have spoken to Toyota about this but they are ignoring what dealers are saying.”

Dealers estimate that the drop in profits this year will be between £100,000-£200,000. Several are now considering whether their future still lies with the Toyota franchise.

Sources say that around 30 Toyota dealers are refusing to sign their 2008 volume targets because they believe they stand no chance of hitting the higher figure – particular when Toyota admits that 2008 will be a tough year with no new models.

In January, Toyota sales were down more than 11% year-on-year.

“This will end up as a self-registration exercise,” complained another dealer boss. He claims dealers lost £190 on average for each car sold in January: “We have had to subsidise cars and trade aggressively to get them onto the street,” he added.

Toyota has this week issued a circular to the network with details of 928 Auris TRs that it wishes them to register before the end of the first quarter. Each dealer has been given an allocated amount, effectively to pre-register.

One said that Toyota’s demand, worth £12 million on retail, was “commercial suicide”.

Dealers are also unhappy about Toyota changing its customer satisfaction scoring system. The previous scheme gave dealers points for ‘fairly satisfied’ and ‘completely satisfied’ scores. Now they only get points for ‘completely satisfied’.

“If a car is delayed due to the manufacturer, it is unlikely we will get a completely satisfied score,” said one retailer.

“Toyota has moved the goalposts – to them there is no difference between fairly satisfied and crap service.”

A close source from within the Toyota network agreed that the carmaker needs to address issues regarding profitability, margin structures and targets. He wants a meeting between dealers and Toyota GB to provide “some reassurances”. But he is confident that Toyota GB will turn it around.

“There are always targets in this industry, but where they are unachievable, it’s not acceptable,” he said.

The source believes dealers are being too hasty to kick up a fuss based only on January results. But he certainly wants to see changes.

“If things haven’t improved by the end of the first quarter and Toyota hasn’t come to the party, there will be hell.”

Several retailers told AM they believe the dealer council is powerless to act on their behalf. And they are unhappy that Toyota elects the dealer council chairman.

For its part, Toyota said it intends to continue with its current policy.

In a statement to AM, Toyota said: “Toyota GB firmly believes in its business direction and on the well established mechanisms to consense this direction with the network. We will continue to pursue business excellence with network profitability at the centre of our plans.”

However, one dealer had a different view. "No one likes changes and there's been an awful lot of change from Toyota over the past four months. You've got to be quick to adapt and i think we have done that very well. Those dealers that have been slow to adapt aren't going to like the changes that have been brought in.

"Toyota's culture is one of constant improvement and we understand that. Realistically the network has to embrace that."

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