TORONTO — Nissan North American executives have signalled that the era of aggressive sales targets could be coming to an end.
That’s welcome news to dealers in Canada and the United States, who have blamed programs such as Nissan’s stair-step incentives for low morale and concerns about profitability.
“Our intent is to attract and retain the best dealers that are out there in the Canadian industry,” Nissan Canada CEO Steve Milette told Automotive News Canada. “If we need to tweak any programs that we have, then we will.”
The change in tone comes as Nissan North America looks to reset its relationship with U.S. and Canadian dealers. In May, sibling publication Automotive News reported that Nissan North America was considering halting its stair-step program.
Such practices have drawn the ire of dealers who view the targets as too aggressive, saying they’re forced to offer deep discounts to chase sales goals even if it puts a strain on profits.
Automotive News cited a letter sent to U.S. dealers by the Nissan National Dealer Advisory Board, saying North America Chairman Jose Valls and his executive team agreed to evaluate moving away from the program and were working on the best timing for the move.
The automaker is also shifting away from fleet sales, which “don’t support brand value,” Milette said. While the strategy might cause short-term pain — Nissan Canada sales fell 7.4 per cent in the first eight months of 2019 in a market that dropped 4.2 per cent — it would eventually increase residual values as well as strengthen Nissan’s brand and boost dealer profitability, he said.
He cited sales of the Nissan Altima, which were down 49 per cent through August of this year, as an example of the brand’s shift in emphasis. The decline has been driven by fewer fleet sales, but retail sales were up on the year, Milette said.
“In the past, decisions were made, and some models were used primarily as fleet, and this is one example,” he said. “And today it’s 95 per cent retail business.
“Could we do more? Yeah. But we’re headed in the right direction.”
MORE TLC FOR DEALERS
The automaker’s emphasis on improving relations with its 210 dealers in Canada was applauded by retailers such as Shahin Alizadeh, CEO of the Downtown Automotive Group in Toronto.
Valls telegraphed that message in meetings with dealers in Toronto in July and again in late August at a meeting of Nissan dealers in Chicago, Alizadeh said.
Nissan North America brass indicated that changes to stair-steps would be coming, although no timetable was announced, he said, adding that he was encouraged by the change in tone.
“Quite honestly, the one distinction between what I heard [from Valls] versus the previous sessions was this underlying message that we’ve got a bit of a problem within our dealer body and we need to fix it,” Alizadeh said. “And if we don’t fix it, we’re not going to grow.”
Alizadeh said both Milette and Valls have to repair the damage caused by stair-step programs, which Nissan North America used as a tool to hit aggressive targets set by former Chairman Carlos Ghosn.
The programs, which reward dealers for reaching those targets, are too demanding and pitted retailers against each other, he said.
“It stems from Carlos Ghosn’s approach to wanting eight per cent return and eight per cent market share, and it doesn’t matter what dealers want,” Alizadeh said. “That’s the epitome of disregard for your most important element, which is your dealer body.”
The new management team must “start partnering up with dealers and not have Nissan wedge dealers against one another, which was what some of the programs were designed to do,” Alizadeh said.
But the meeting with Valls was “very encouraging [because] he saw the overall relationship having to be rejigged and reset, including their approach to the dealer body. He said they need to start looking at their dealers as their partners.”
A PLEDGE TO DEALERS
Valls, who spoke with Automotive News Canada in July, said he had both individual and group meetings with Canadian dealers.
“I was very highly impressed with the quality of our dealer partners,” he said. “They want to see the new cars — they know the new cars are coming,” referring to the automaker’s launching 10 refreshed or new vehicles by the end of 2020.
Valls pledged “to focus on growing not only the brand power but the dealer power and making sure that they have a long life ahead of them,” Alizadeh said.
But only time will tell whether words will turn into action, he said.
“I’m making a huge investment in Nissan and Infiniti [in Toronto], and quite frankly, I was a little concerned about direction” Alizadeh said. “And if [Valls’] ... overall commitment to the cause was to be accepted as what it is, he’s got a very good chance of making believers out of us in a short time span.
“But it’s going to take time.”