Q&A: CHIP GENGRAS, VOLVO RETAIL ADVISORY BOARD

Struggling Volvo dealers have long product wish list

Chip Gengras
Age: 44
Dealer since: 1993
Dealerships: Gengras Volvo of East Hartford (Conn.), Gengras Volvo of Meriden (Conn.)
Average monthly sales: 47 new, 55 used
Quote: "We have fewer models and variants to sell than in the past."
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Volvo is teetering in the United States with sales that were down 10 percent last year in a market that rose 8 percent.

The brand was hurt by a reduced product range and no new offerings, said Chip Gengras, who has two Volvo dealerships in Connecticut and is chairman of the Volvo Retail Advisory Board.

Dealers have a long wish list of products for the United States, especially a compact vehicle to replace the defunct V40, he said. They also want more marketing and a return to the messages of the past that emphasized safety, traditional Volvo attributes and Scandinavian styling.

He was interviewed by Staff Reporter Diana T. Kurylko.

Q. Volvo had a rocky year in the United States. How was 2013 for its dealers?

A. It was not what we had expected with the industry rising. With the XC60 and S60, our two most current models, we saw growth year over year. But total retail sales are down because in some of the other segments our volume was lost a little bit.

The last couple of months our true retail through the dealer channel, including demonstrators and loaners, wasn't bad. It was better than was reported for wholesale units.

I do not have the total numbers. We had put a fair amount of vehicles in the beginning of the year and middle of the year into a loaner fleet or demonstrators. Many retailers sold out of those units in the last quarter.

Have refreshed versions of your other models helped sales?

The refresh on the S60 and XC60 has been well received, and we continue to have year-over-year growth on those models.

And the new Volvo-designed DriveE smaller-displacement engines?

We are just starting to get allocations of those. But we are very excited about the story we have to tell. They are class-competitive, and that will be a game changer.

Will the new V60 wagon help 2014 sales?

It is a segment we have not been in for a number of years, the small wagon segment. Volvo is doing a good job of getting out the excitement and information. We will sell between 5,000 and 7,000 a year. It will create some traffic and excitement.

The new DriveE engines will all be either four- or six-cylinder. Will the lack of an eight-cylinder powerplant end hurt Volvo?

No. People care more about horsepower and torque than the size of an engine. Many manufacturers have moved to smaller engines with higher efficiency. The DriveE in the V60 has a high range of 240 to 300 hp -- that's a lot. The T60 will be 325, and that will be the six-cylinder; the four-cylinder, with 240 hp, gets 38 mpg on the highway.

Volvo has eliminated many vehicles. Does that make it difficult to survive as dealers?

It is more difficult when you limit the vehicles. It has impacted dealers. At some point we hope to have a 40, 60, 80 and a 90. I do not know the product plan after XC90 ends.

Will you get an S90 to replace the S80 sedan?

They have the concept car that they have showed. They have not committed to it being a production car.

Has the phase-out of your only convertible, the C70, hurt sales, and will there be a replacement?

I cannot speak to the volume. Personally we have done well with it. I do not know what their plans are. They stopped production at the end of 2013.

Will U.S. dealers get the compact V40 hatchback and crossover?

We have had no confirmation on whether we will get it or not. They are focused on the launch of the XC90, which is now a year away, and that will hopefully re-establish Volvo in the premium market.

It is on our wish list to get the V40 and XC40. There are several things Volvo is focusing on. One is more product offerings. We would like the V40, but we want to get our brand awareness up and to get back to talking about safety, the functionality -- and get our message back on TV.

Wasn't there a 30 percent increase in marketing last year? How did it work out?

The retailers were disappointed in that there was an increase in spend but a decrease in traffic.

Volvo said they have changed agencies, and the direction we heard in North America and globally is that Volvo needs to get back to its roots of safety and environmental friendliness, ease of use and simplicity of design, and also talk about that in their marketing.

Most of the retailers have been saying that, and we support that direction to get back to safety and our core values. We think that will be more compelling to the public.

So dealers are optimistic with the change in agencies and with the appointment of a new chief marketing officer at Volvo Cars of North America?

We are much more optimistic also because of the leadership from Sweden and Tony Nicolosi [CEO of Volvo Cars of North America]. They are resolute in getting back to the core values.

Did Volvo's marketing fall short of the mark?

It did not talk about our core values, so Volvo as a brand got lost and as a result consideration was stagnant or declined.

Did the challenge marketing that said a Volvo isn't for everyone not work?

I wouldn't say it didn't work. There was a rising tide last year with brands and we did not rise with them. The gap of how we are perceived and our brand recognition widened, and that was one of the reasons our sales went down, in addition to the fact that we had fewer models to sell.

How are dealers reacting to the smaller lineup?

We have been asking for more product and more product. Some of our product is stale. We are now within a year of the XC90, and when it came out in 2004 it was the No. 1 selling European sport-utility in the U.S. And we are excited about V60 and we would like to see V40 and V40XC, but we have not had a commitment to whether that is going to be in the product plan.

You said Volvo got more aggressive in the fourth quarter.

Volvo deals were very strong and very competitive, and the retailers felt that we had competitive offers on lease and purchase.

Is it still a goal to drive the lease penetration to 40 percent?

Volvo Finance has been a good shot in the arm and will help us retain our customers. They have committed to driving the lease percentage to the 40 percent range -- we are in the 20s -- and making sure products compete with price and content with the competition.

Does that mean a shift in pricing?

Not necessarily repricing -- they may look to add content at no charge and what comes standard -- navigation, back-up cameras, blind spot warning. On some cars these are options; certainly navigation is.

Will Volvo add improved in-car connectivity, a must with today's premium vehicles?

We will have Sensus Connected Touch by the middle of 2014. Connectivity will make it easier for the consumer. There will be connectivity between the car, the retailer and the consumer, which should make it easier for us to make sure the car will operate at its optimal efficiency. I am not schooled on all of the aspects, but the goal is to make the driving experience better -- monitoring how the vehicle is operating and being able to let the consumer know when scheduling is due, potentially even make some of the scheduling through the car and the retailer so that it takes some of the burden off the consumer.

What's the dealer reaction to the executive changes at Volvo Cars of North America, especially the replacement of the CEO with Tony Nicolosi?

We were frustrated with the sales results of 2013. There is a very positive reaction to Tony Nicolosi. He has been with Volvo a long time, and they will rally around him. He has done a great job with Volvo Finance, and he understands the network.

Can a small car made in China be sold as a Volvo in the United States? That is the plan, isn't it?

I think it would be fine. The Germans and Japanese produce cars in the United States. Where it is manufactured does not matter as long as it is designed in Europe.

Is the XC70 -- which sits higher than a station wagon but lower than your crossovers -- still competitive?

In my opinion, it is one of the best cars we make. It is extremely versatile and has the performance of a wagon and sport-utility. Its ride and its ability in snow is second to none. The price has not changed dramatically. Volume is down in that segment. When consideration goes up we will sell more.

Can Volvo still strike a chord with wagons? Volvo used to own the wagon business.

I think they can. The V60 will be the first step, and the retailers would hope that they have a crossover and an XC in each platform, whether it is 40, 60 or 90.

What's new with Volvo's dealer facility program?

They had a performance and growth strategy that Tony Nicolosi has cancelled. It included a facility and sales objective component, and that has been tabled for the time being. The facility program was in the process of being redone last year. They still do not have final designs, but it will not be mandatory or be tied to a performance and growth strategy or tied to margin. Volvo will announce the new plan by the NADA convention.

The performance element of the margin is also gone. Why?

There was a lot of angst in the dealer network. We had to protect our margin, and Volvo was backward last year.

It was a bad time to have a variable margin program tied to sales performance or to facility.

What do you hope to accomplish as dealer board chairman?

I want to make sure that the retailers, Volvo Cars of North America and Volvo Car Corp. are aligned with their goals and strategies. I want to increase communication and transparency on where we are on key metrics -- which, to us, are brand awareness and consideration; retailer throughput; and retailer profitability.

What are Volvo dealers doing to attract more F&I business?

The retailers are pleased with Volvo Car Finance and the 360 program, which is our lease portfolio retention business. In 2014 we will have 5,000 to 6,000 units coming back, and that will grow exponentially after that. This is the first year that we will have control over our lease portfolio, which will be positive.

How would dealers like to see Volvo's Web-based marketing improved?

One of the things that the new agency will try to accomplish -- and we do not have the same budgets as some of the other manufacturers -- is to be more creative. The Web experience should be class-leading in how easy it is and how it tells the Volvo story.

Does Volvo help with lead generation?

Most dealers' leads come through their own Web site. We need our digital marketing to be more impactful. Web traffic has gone up, driven by the refreshed S60 and XC60.

Is Volvo doing enough on the social media front?

I know there will be a much larger focus on Internet and Web marketing. The retailers have seen a much more active public relations push in the last quarter, which is very exciting. There has been more information and buzz about Volvo, and we need for that to continue.

You can reach Diana T. Kurylko at dkurylko@crain.com. -- Follow Diana on Twitter


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