Hyundai dealers prep for launches, surge in lease returns

Age: 52
Dealer since: 1989
Dealerships: Hyundai of New Port Richey, New Port Richey, Fla.; Hyundai of Wesley Chapel, Wesley Chapel, Fla.; Hyundai of Deland, Deland, Fla.
Average monthly sales: 750 new, 300 used
Quote: "Everybody who has a Hyundai franchise to some degree thought that the unprecedented growth we've had for the three years prior was unsustainable for a number of reasons."

Hyundai lost market share in the United States in 2013 for the second straight year as its sales flattened during the industry's continued recovery. Competitors were back in a big way, with new products and deep pockets to stoke demand. But Hyundai had just one vehicle launch last year, a far cry from the avalanche of launches during the three previous years. Despite those challenges, the brand's sales rose 3 percent to a record 720,783 units in 2013, and Hyundai continued to be an industry leader in dealer satisfaction with the factory, and in customer loyalty.

The brand also had another major change -- the departure of CEO John Krafcik, who had led Hyundai for five years through a dramatic brand ascent. He was succeeded by longtime U.S. sales boss Dave Zuchowski, who became CEO on Jan. 1.

Zuchowski's biggest tasks in 2014 include preparing Hyundai and its dealers for a surge in lease returns, and launches of the redesigned Hyundai Genesis upscale sedan and the next generation of its big-volume Sonata mid-sized sedan.

As Scott Fink, the owner of three Hyundai dealerships in Florida, entered his sixth year as Hyundai's dealer council chairman, he spoke with Staff Reporter Ryan Beene about how Hyundai dealers fared in 2013 and what's ahead this year.

Q. What was your reaction when you heard that Hyundai Motor America CEO John Krafcik's contract had expired and he would be replaced by Dave Zuchowski?

A. I was surprised and I wasn't surprised. Being that I'm chair of the dealer council, I spend a fair amount of time with these guys, and I'd gotten a sense that something was going to happen. I was surprised at how quickly it happened. I'm certainly not privy to all that, but I sensed that something was going to happen, whether it was going to be John's departure or Dave's departure.

So I'm sad to lose John. He's a great guy who did wonderful things for the company and wonderful things for the dealers. But at the same time I'm very happy for Dave and I'm happy Hyundai was able to retain him.

What does Zuchowski bring to the table as CEO for the brand and its dealers?

I think the most important thing is that Dave's a sales guy. He's been a sales executive for many years at Ford, at Mazda and now at Hyundai. I think at a challenging time in the industry, competitiveness back to prerecession days, you need a sales guy -- one who understands the processes and understands what needs to be done from an incentive support perspective. And Dave's very much a dealer guy. The dealers love him, they relate to him, and Dave's a great communicator, especially when it comes to talking to the dealers.

What did other dealers think about the news?

I think the average dealer felt that this relationship and executive office could go on forever. But highly motivated, intelligent people are always looking for the next move. That's where I think the dealers a little more inside were not surprised by this, because they knew a guy like Dave, with all the potential in the world, if he didn't get the opportunity at Hyundai he was going to get it somewhere else.

2013 seemed to be a challenge for Hyundai, with the company's U.S. market share shrinking for the second straight year and sales flattening. How was the year for dealers?

I think it's fair to use the word challenge. At the same time, everybody who has a Hyundai franchise to some degree thought that the unprecedented growth we've had for the three years prior was unsustainable for a number of reasons. First was the product cadence, second was the torrid growth pace we had and third was that some of the availability issues that we've had were going to hold us back. Still, all in all a pretty positive year.

Was it harder to win consumers' attention with only one vehicle launch, the Santa Fe, after a heavy product cadence from 2010 through 2012?

There's no doubt about it. When you don't have the product launches, it's a lot more challenging to conquest. At the end of the day, you can have great dealers, but product drives the consumers' attention and consumers' purchase decisions.

Limited inventories have been a challenge for Hyundai dealers for a few years, but vehicle stocks are back to 60 days nationally. Are dealers getting all the cars they need?

We're in a better position than we were last year. For our core cars, the answer is yes. But there are specific lines where we continue to struggle with availability, like Tucson, Veloster, Accent and those cars, which might account for 20 to 25 percent of our sales.

Hyundai's advertising seemed to be more deal-oriented in 2013. Did that help drive traffic?

I would say it has helped us drive traffic. At the same time, when you don't have those product launches, you don't have as much exposure. You guys aren't writing about it. The buff magazines aren't writing about it. And that stuff that you're not paying for, you're not getting and I think that winds up being material. When you're doing articles about new product all the time, that's free advertising. You're not sitting there writing about deal advertising.

We pushed for more deal support because we flat-out needed it because we didn't have those launches to really tout.

What are the major issues facing Hyundai dealers in 2014?

One is product related, and first is getting the new Genesis, which the dealer council was privy to see in South Korea about three weeks ago, and to get that off to a really fast start. The car is a flat-out winner. What a dramatic upgrade compared with the current Genesis, which has done extraordinarily well. Another one is preparing dealers for the all new Sonata, which really could give us a huge sales opportunity with its massive owner base.

At the same time, that new Sonata doesn't come out until midway through the year, so it's also about keeping dealers focused and driving forward with the '14 model as we prepare for the '15.

What do Hyundai dealers think about the company's certified pre-owned program?

Generally speaking, the dealers really like it. If sales results are any indication, the program has been very well received. Month over month, Hyundai and its dealers continue to sell more CPOs. The dealers need to get more engaged in that program, especially when we start to see more of these lease returns coming through.

For the program to keep growing, does it need improvements or do more dealers need to jump on board?

We see Hyundai Motor Finance continue to layer in better standard rates to make their CPO program more competitive. I think now the program is extraordinarily competitive. The challenge is to get more dealers to recognize that selling CPOs is not a replacement for new-car sales -- it's an enhancement. Just look at my sales. My new-car sales are up and I'm also setting records every month with CPO sales.

How have dealers received Hyundai's Car Care Express fast-service program?

The feedback I've gotten from dealers has been very positive. It's helped them become more efficient in the service drive and frankly the dealers need to do that. Generally speaking, many Hyundai dealers are still under-facilitized to handle the volume of service, so the program helps dealers be more efficient. We've taken advantage of that, and we're seeing the benefits.

For a few years, you've said that many Hyundai dealers need more service capacity or more throughput. Has Hyundai addressed this?

Yes, but it's not related to infrastructure as much as it is related to helping the dealers become more efficient. About four or five weeks ago, HMA facilitated a pilot program with the dealer council to bring in trainers to do some testing, like a mini-NCM 20 group for service, to try to show the dealers the financial opportunity of being more efficient in the service lane. That was very, very well received by the dealer council, and that's going to be rolled out to the dealer body.

Having more bays is important and good, but I contend if dealers can be more efficient with what they already have, they can further enhance their grosses and be more effective at satisfying their customers.

How effective are Hyundai Motor Finance's branded F&I products?

The dealers that have committed to the factory program are happy. I think they're at about a 12 or 14 percent penetration rate and their goal for next year is 18 percent. It's a slow growth plane for them, but the dealers that are doing business with them in volume are very happy with the products and the service.

Are Hyundai Motor Finance's branded products as competitive as those from other providers?

The biggest issue with the competing providers is related to manpower. I don't do a lot of business with [Hyundai Motor Finance], solely because I need JM&A's infrastructure. I have such a big organization that if I have an F&I manager down, I need support and JM&A will have feet on the ground at my dealership the same night. Where Hyundai Motor Finance would like to be able to do that, they're just not there yet.

Hyundai has been pretty aggressive in setting up new digital tools -- such as electronic satisfaction forms for service customers and a pilot program for online service payments -- in dealership service drives. Have you been satisfied with Hyundai's efforts to bring fixed ops into the digital age?

Beyond HMA, I think the industry has a long way to go. The biggest challenge that we face is that there's a lot of different DMS providers, which causes inconsistencies. But from a consumer's perspective, think about it. There's no reason why when you pull your customer into the service drive that the adviser can't greet you with a tablet, do a walk-around, have your car on the tablet, get everything written up right there for you, process it, and if you want a loaner car, get it for you, or if you want to go inside and have a cup of coffee, they move the car inside and you're checked out immediately. No hesitation. Nice and simple.

Most of the retail environments today can do that, from the Apple store to Nordstrom's to restaurants. Why can't car dealerships do it? You need more than just the OEMs. You need the technology providers to help the OEMs.

What are the biggest sticking points? Is it the complexity created by the various dealership management systems?

I think that's it. It's the DMS systems and the different OEMs. You get a guy like me -- I've only got five or six stores, different franchises -- but I have internal integration issues. If you get groups that have 20 different franchises, that's where the problem lies. But from the consumer's perspective, they don't really give a hoot. They just want it to be easy. And we want it to be easy. And from a customer satisfaction standpoint, that would be great.

You can reach Ryan Beene at autonews@crain.com

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