GM warns dealers who are "gaming" their allocation system

[XDCX]

Automotive News has an interesting article stating that GM sent letters their 4,500 dealers indicating that dealers who are caught manipulating GM's allocation system could be subject to the following penalties:

$500 fine per unit
Elimination of Factory Incentives
Termination of their GM Dealer Agreement
It appears the most common manipulation attempt is done by dealers who have multiple dealer codes - they'll simply transfer all of their hot product to one dealer code so the other dealer codes appear "empty" and they'll receive a full allocation of product. GM referred to this practice as "false transfer of products" in their letter to their dealers.

The other abuse caught me by surprise - falsifying sold orders to receive allocation. Unlike Chrysler, it appears GM provides additional allocation for sold orders and one source suggested as many as 30% of GM's sold orders are false.

The final item that caught my attention was GM's Essential Brands Elements program that pays dealers a quarterly incentive. While I was aware of the program the payment amounts surprised me - up to $50,000 for a smaller dealer and over $1.5 Million for a larger store. Not surprisingly, the article mentioned that's the difference between red ink and black ink for many dealers.

Is allocation "gaming" a big problem at GM or is the warning just precautionary?

[57years]

If you want any semblence to the truth, you should move this thread to Area 51. I am interested in the NEW GM's dealers comments. I know what happened in the old GM.

[Lakeshow]

Marking orders sold has been done for years, it does speed up the process. Even doing dealer trades it wasn't uncommon for aged inventory to have a sold order RPO.

I'd be interested to hear what the NEW guys have to say also.

[danderson]

I will put the letter on here if it gets moved to area 51. In our market it happened quite a bit and I may or may not have participated........

[XDCX]

Well, that's three votes for AREA 51. :)

I'll start a new thread in AREA 51 and leave this one here in the hopes it attracts more GM Dealers to DealershipForum. I'll also add a comment to the story in Automotive News so if there are GM dealers who would like to further the conversation about GM's allocation system they'll know about the forum.

For dealers who may be new to DealershipForum, AREA 51 is a hidden section of the forum that can only be viewed by approved members. Members are invited to join AREA 51 once they have participated in the forum and their identity can be verified.

[XDCX]

On the West Coast (and I think increasingly across the country) spot deliveries are the only way business is done. Dealers rarely, if ever, wait for the customer's financing to be approved before they deliver a vehicle.

This can be a real problem if the dealer reports the car as sold to the OEM - it triggers the incentive payment, warranty start date and factors into the dealer's inventory/allocation calculations.

Does GM have a process to "unwind" a vehicle that was reported as sold and then comes back to the dealership's inventory because the customer couldn't get financing?

[57years]

Yes, "return to stock" delivery entry does it all. Debits the rebate from the open account, and deletes the customer name file. Since rebates are paid weekly by credit to statement, all nets out.

I understand there are Consumer attorneys in front of Federal Trade Commission arguing "spot" delivery is an "unfair trade practice" and should be outlawed. Stay tuned on this one with this administration in power.

[XDCX]

Yes, "return to stock" delivery entry does it all. Debits the rebate from the open account, and deletes the customer name file. Since rebates are paid weekly by credit to statement, all nets out.

Would dealers ever be tempted to use that process to increase their allocation? (e.g. Report hot products as sold right before the allocation calculation and then "return to stock" once they've received their allocation.)


I understand there are Consumer attorneys in front of Federal Trade Commission arguing "spot" delivery is an "unfair trade practice" and should be outlawed. Stay tuned on this one with this administration in power.

Wow, that would totally change the way business is done out here on the West Coast. I'd be amazed if a law like that passed - I'd have to bet the dealers have enough political horsepower to keep a law like that from passing.

[CL Pgh]

Dealers rarely, if ever, wait for the customer's financing to be approved before they deliver a vehicle.

I understand there are Consumer attorneys in front of Federal Trade Commission arguing "spot" delivery is an "unfair trade practice" and should be outlawed. Stay tuned on this one with this administration in power.

I'd be amazed if a law like that passed - I'd have to bet the dealers have enough political horsepower to keep a law like that from passing.

Welcome to Pennsylvania! If you spot a customer with all paperwork completed… and then can’t get the customer financed at the agreed finance terms… the dealership owns that finance contract and the customer now pays the dealership the payments. Period!

[XDCX]

Welcome to Pennsylvania! If you spot a customer with all paperwork completed… and then can’t get the customer financed at the agreed finance terms… the dealership owns that finance contract and the customer now pays the dealership the payments. Period!

Damn, I don't know how you do it.

The practice of spot delivering has been going on for so long on the West Coast I think a lot of customers would get mad if they learned they couldn't drive their new car home immediately.

The only laws I'm aware of on the West Coast that could force a dealer to honor the finance contract have a set number of days the dealer has to get the contract approved. If the dealer exceeds the number of days allowed the customer could force the dealer to honor the finance agreement. As memory serves, the number of days in Washington is between 7 and 14. :confused: