Q&A: RC HILL, MITSUBISHI NATIONAL ADVISORY BOARD

Mitsubishi dealers struggle through dearth of product

RC Hill
Age: 52
Dealer since: 2003
Dealership: RC Hill Mitsubishi, DeLand, Fla.
Average monthly sales: 58 new, 70 used
Quote: "Right now, I don't think dealers are satisfied as a whole, and that's a fair statement."
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Mitsubshi rebounded from its multiyear sales slide in 2013 with an 8 percent gain.

But challenges remain, namely in the form of product.

The brand has had a five-vehicle lineup since the Mirage minicar went on sale last fall. Although the automaker plans to add SUVs, including a plug-in hybrid Outlander and the next-generation Montero, those won't arrive stateside until 2015 at the earliest.

Meanwhile, Mitsubishi's dealers will have to battle cutthroat competition this year to maintain the momentum.

RC Hill, owner of RC Hill Mitsubishi in DeLand, Fla., and chairman of the Mitsubishi National Advisory Board, spoke with Staff Reporter Ryan Beene.

Q. How was 2013 for Mitsubishi dealers?

A. There are definitely the engaged dealers and the dealers that are still waiting, but overall it was much better in 2013 than in 2012. For the country, Mitsubishi was up 8 percent, and I know for us, we were up more like 25 percent. So I think some dealers are getting engaged, and that's where we're seeing our lift.

That was a problem for a while, right? Having dealers who were not focused on new cars but more so on selling used cars?

We're still in that transition now. And really no fault to the dealers, but Mitsubishi kind of went away by pulling product for us to sell. That's been a challenge, having fewer vehicles to sell and doing what we needed to do to survive.

What major issues do Mitsubishi dealers face in 2014?

The primary issue for Mitsubishi dealers is just that we can't get the products fast enough. We have the core products -- Outlander Sport, Outlander and Lancer -- and now we have the Mirage, which gives us four. As those core products have entered the market, they've been very competitive, they're priced in the right realm and have a lot to offer. So we're seeing good retail results, just not enough to carry a franchise, quite frankly.

I don't know if I should be that severe. We did around 50,000 units at retail as a franchise last year, and what's really going to be the big turning point for dealer engagement is when we get to 100,000 units. We are maybe two cars away -- an SUV and a car -- from getting there.

How much of a challenge is it to carry a Mitsubishi franchise with such a limited lineup?

We as dealers have to push and get it through to them how important it is to have the advertising and support of our products because we have so few of them. In the last few years there have been some programs that have been quite a bit of help, and it seems like the dialogue is there, but we have to not let up and continue to push and get the manufacturer to support us in this transition period.

But we are upbeat about the product we're getting. Although quite impatient, I think most dealers are feeling that the product we're getting is quite viable.

How is the factory's current level of support?

We're feeling a commitment recently to volume growth. We've seen in the past few quarters some quick incentive action where it's needed to grow a particular model. It seems that they're moving quicker to improve advertising spend. For a while there we weren't getting product because of production interruptions, but that's been straightened out. They're moving a little quicker to get the right incentives on the cars. We just need to continue to keep that attention and that's a balance.

What do you hope to accomplish as chairman of the dealer council?

I would like to see -- and I already think we've started down this path -- improved communication between the dealer body and the factory. What we've seen with Gayu Usuegi, the chairman [of Mitsubishi Motors North America], he arrived in mid-2012 and really spurred on open communication that we hadn't seen before, and that was seen through the Mirage. Myself and several dealers got to drive four or five different versions of the car and they took our recommendations back and made changes. To see that type of communication was a huge change for the dealers, and I want to continue that. It seems both sides are getting comfortable with the communication, and they're taking the input and getting it into the product

Beyond that, I'd like to see improved public relations so the manufacturers can speak better to some of these rumors going on. I think they've done a pretty good job, but we've got some work to do get our reputation back to where it needs to be.

You're referring to the past speculation that Mitsubishi might leave the U.S. market?

Yes. I'm not hearing those rumors in the auto industry anymore. The auto industry media and others in the industry get it that they're pretty committed to the U.S. market, but it's outside the industry where those rumors need to be quelled. From the outside looking in, it doesn't look good, but from doing a better job communicating what we're doing, where we're headed would be a really good thing, in my opinion.

Are Mitsubishi dealers satisfied with the brand?

I think they're satisfied with the product we have. I think they're dissatisfied with the number of vehicles. Dealers will be more satisfied as the national volume grows. I think 100,000 units is where we'll start to see more satisfaction. Right now, I don't think dealers are satisfied as a whole, and that's a fair statement.

What happened to Mitsubishi's dealer count in the United States last year. Did it change?

I'm not privy to those numbers, but I believe it was flat and it's around 380 dealerships. There has been a nice influx of most recently Suzuki dealers. I think the Suzuki dealers made a very good impact on volume already.

Does Mitsubishi have a brand identity in the United States? If so, what is it?

That is developing. We feel like right now, with the new product coming out, it feels like we're coming with pretty aggressive-looking SUVs and they're positioning themselves pretty well with the new product. The Outlander Sport has an aggressive look, and it's positioned well in a new segment. The Mirage would be coming in below most other cars, but that position in price, warranty and safety is a good position, and we're seeing success with it. The Outlander came in in a good position and we're seeing success with it.

We feel like we need the marketing dollars on those, and it's not enough total vehicles, but we feel like we can make good progress with those vehicles.

Mitsubishi CEO Osamu Masuko has said he wants to sell the next-generation Pajero and a plug-in hybrid version of the SUV in the United States as part of the company's plan to become an SUV and electrified vehicle specialist. Will that strategy work for dealers here?

I had an opportunity to drive the Outlander plug-in hybrid, and the dealers who got to drive it were very impressed. Our concern is the volume play on it. We also don't know what the volume plan is for the plug-in hybrid version of the next-generation Montero is, if it comes back. We're proud of Mitsubishi for taking the EV step. I can see the progression of the EV technology from the i-MiEV and how it's making the plug-in hybrid phenomenal. So I can see the progression of technology coming into our vehicles; I just don't have a glimpse of how far it could go, and we're nervous about it being a volume car.

The dealers want to see volume vehicles, not the plug-in hybrid. But we're open to these vehicles because after you drive one, they are amazing.

How big a blow was the news that the Outlander plug-in hybrid would be delayed until 2015?

We had high expectations to see that come because we are so hungry for product, so that was disappointing. I don't know what kind of volume it would have played in the franchise. It needs to be completely ready for the U.S. market. That's what we need to push for is to get product here, sooner. They need to understand that we need product now. And they have to understand that the North American market is hot.

Part of our problem is a slow roll of product. We're looking around us and other manufacturers are cranking out products with lifecycles that are very short. We've seen product cycles improve with the Outlander Sport and the Outlander, but we're concerned about the Lancer. We're looking for Mitsubishi to move as quickly as some of our competitors in the speed of moving the right product to market quicker -- whatever that takes.

Are Mitsubishi dealers profitable?

Profitability in 2013 was an improvement over 2012, and I think we will see an improvement in 2014 just with the Mirage. But we still have a long way to go.

How's demand for the Mirage?

It is selling well. The turn is good on it. Dealers put in huge orders, higher than Mitsubishi anticipated. There was a lot of concern about whether we could sell that car in the U.S., but it's in an excellent competitive position because it wasn't marketed to be anything more than it really is, which is a Point A to Point B safe, economical car at 44 mpg and a 10-year warranty -- for $12,900.

There are some dealers that have really gotten on board and have already done 30 to 40 units a month in December.

What about the rest of the lineup?

On the other models, front end profit is a challenge. The more competitive the market is, it's very difficult. What we need to do is build our marketing to create more floor traffic to drive those cars back to profitability, particularly the Outlander Sport and the Outlander.

What vehicles do Mitsubishi dealers need most, in order of priority, to flesh out the lineup?

A Galant [mid-sized sedan] replacement. I'd like to see the Montero Sport -- a larger SUV than the Outlander for larger families, and then I would like to see the full-sized Montero back. And we'd really like to see our Lancer get back to being competitive. That's a priority.

They have a plan and they're sticking to the plan. They just need to go faster.

You can reach Ryan Beene at rbeene@crain.com. -- Follow Ryan on Twitter


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