Q&A: DAVE ZUCHOWSKI

Hyundai boss aims to boost retail sales momentum

Zuchowski: "We developed a very competitive CPO program, and our CPO volumes are going up."
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Hyundai Motor America CEO Dave Zuchowski says his top priority is to get Hyundai's retail sales momentum rolling. He'll get help from the redesigned Genesis sedan arriving this spring and a redesigned Sonata mid-sized sedan hitting showrooms this summer.

Zuchowski spoke at the NADA convention with Staff Reporter Ryan Beene.

Q: Did Hyundai's retail sales decline last year?

A: Yes. What happened was our total performance was always a little understated because in the midst of growing our volume we were taking down fleet. Last year we took fleet up a little bit and retail fell off a little bit so within our 3 percent total growth, retail was down. That's the first time that's happened in several years and we understand the causes and factors at play.

My No. 1 priority is getting retail momentum going again. Our greatest success over the last several years was taking Hyundai from a secondary brand to a primary brand. Being a primary brand is absolutely critical to us, and in order to do that you've got to keep coming with fresh product, which we are; you've got to regain retail momentum and share, and you've got to turn around dealer profits.

Q: How were Hyundai dealer profits last year?

A: Our dealer profits, which are still very strong, were down a little bit on a year-over-year basis. There's actually a good story within that. It was off about 15 percent on a year-over-year basis after increasing elevenfold over the last five years. Historically, Hyundai has always been heavily profit-centered on the new-car department ... which put us at risk because new vehicles are more volatile.

We developed a very competitive CPO program, and our CPO volumes are going up. We did less than 5,000 CPO five years ago, and last year we did about 75,000 ... which helps the used-vehicle department.

With fixed operations, we've had a 52 percent increase in units in operation over the last five years with all this new volume, but you don't feel that right away because our cars don't really break down. Because of the processes we put in place, our customer pay business is on the rise and we're starting to benefit from the increased volumes we've seen over the last five years that are starting to show up in the shop now.

We had significant increases in fixed-operations performance and significant increases in used-vehicle operations performance, which helped offset the decreased performance of new-vehicle operations.

When you have brand-new product your grosses are better and you're turning inventory really quickly, so your holding costs are lower and there's all sorts of things associated with that. That went backward a little bit last year, which was offset by used and fixed ops.

What's your outlook for 2014?

As we go into this year, we have two new products, which will help the new-vehicle department, and we've got much stronger used and service operations. Through a difficult time last year, we think we built a much stronger foundation for long-term sustained dealer profitability because we've done a good job of balancing the profit centers. You never want to say our dealer profits were down 15 percent but it's a very good story within that decline.

What product or technology areas are top of mind for Hyundai?

We're always looking at segments that we're not in right now that maybe we should be based on where the market's going. We're very intrigued by this B-segment CUV.

First we want to take care of the segments we're already in with Tucson and Santa Fe, but that's certainly something we're looking at. We think it's an interesting segment.

We're catching up quickly, but we've been a little bit behind in the alternative fuel area.

We've got the Sonata hybrid right now, but we've got lots coming in a very short period of time.

The fuel cell is the next step, which is coming this year still. We've got plug-ins. We've got a lot coming.

When is the plug-in coming?

We're not talking about it yet, but I think it's later in 2015.

Will it be a new nameplate?

Can't say, but I can say that this is one of the areas that will grow our business and it's critical for us because of CAFE and ... we don't have ownership of one strategy. We pretty much have the waterfront covered ... and our alternative fuel strategy is coming much sooner than some of our dealers think and it's going to be really good news.

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


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