Kia's race to sell off '13 Souls

LOS ANGELES -- Kia's best monthly sales gain of the year came with an 11th-hour push from the factory, one that could leave dealers with thousands of "sold" cars that will have to be sold again.

On Dec. 2, the last day of the November sales reporting period, Kia sent a memo to each of its dealers offering $1,800 in bonus dealer cash for each 2013 Kia Soul reported sold that day. The one-day-only spiff would be the last one offered on the 2013 Soul, according to dealers asked about the program, and subsequent sales no longer would count toward monthly stair-step incentive programs.

The timing of the memo -- received late in the afternoon on the West Coast and well into the evening in the East, dealers said -- meant dealers had only a few hours to report the cars as sold in order to qualify for the $1,800 bonuses. Some of those dealers said the short window left them little choice but to report those cars as sold on Dec. 2, and then try to sell them to actual customers later.

To qualify for the bonuses, dealers had to classify the sales under a special program code, "FNLPY," that allowed them to report a sale to the factory and remove the vehicle from the inventory system without having to furnish any information about a retail customer, according to the general manger of a Kia dealership who asked not to be identified.

After a string of mediocre monthly sales results this year, Kia reported an 11 percent gain for the November sales cycle ended Dec. 2, propelled by a 77 percent spike in sales of the Soul, a boxy subcompact.

Dealers have been selling down the 2013 Soul since the arrival of a redesigned 2014 model this fall, but at the time the Dec. 2 program began there were no consumer incentives in place on the outgoing model, dealers said.

It's unclear how many 2013 models were reported sold on Dec. 2. Kia says about 2,600 2013 Souls were in stock when the incentive program was announced to Kia's roughly 765 U.S. dealerships.

The program was essentially along the lines of the common final-payout program factories give to dealers at the end of a vehicle's model year, dealers contacted by Automotive News said. But dealers said they are usually notified about such programs at least a month or more in advance.

"I didn't know it was coming," Don Hobden, chairman of Kia's national dealer council, said of Kia's memo, which was obtained by Automotive News. "I was as surprised as the dealers that I spoke with were ... that it happened so quickly at the 11th hour of the close of business."

Several other dealers contacted by Automotive News, who asked not to be identified because they did not want to be viewed as criticizing Kia publicly, were also taken aback by the timing of the offer.

"I've never seen anything like this," said one multifranchise dealer whose brands include Kia. On that Monday, he said, "at about 30 or 40 minutes before we closed our store and our books at the end of the month, we got a frantic call from our district manager" about the program. The upshot of the call, according to the dealer, was that "you will have no incentive help if you don't report them sold today."

Tom Loveless, Kia's executive vice president of sales, said in a statement that Kia moved quickly to get dealers the extra cash to be used in December.

"While we would have preferred to share information with our dealers earlier in the day, the nature of the program required a thorough approval process to ensure accuracy and the rollout occurred immediately upon final authorization," he said.

Hobden, managing executive of a dealership group called the Kia Store, which owns six Kia dealerships in Kentucky, Alabama and Indiana, said the extra cash made the program a positive one overall, despite the timing.

The program "put money in our hands that the dealer council has been asking for for quite a while," Hobden said. "Ultimately, it's a good thing. The Soul from its inception has been a big part of who we are, what we do and where we're going, and I understand them wanting to put the emphasis on the '14 in December."

At the same time, the program creates some complications for dealers. Kia says that under its Dec. 2 incentive program, cars recorded as sold Dec. 2 can be marketed later as new cars, as long as they weren't titled and didn't have damage or excess mileage. But their warranty periods begin on that initial date. If the car is later sold to a retail customer, Kia says it expects dealers to disclose the shorter warranty clock to the buyer.

The sale wouldn't be counted again toward the manufacturer's monthly results.

Dealers contacted by Automotive News said it's not uncommon for manufacturers to nudge dealers to report cars in inventory as sold ahead of a key reporting deadline. Actually selling those vehicles to consumers requires additional paperwork and disclosures, but is generally "not a big deal," said one West Coast dealer who asked not to be identified.

"This has been going on for a long time with factories trying to stay in the hunt with their count," that dealer said. "We don't like to do it ... but it's not the first time in our long history of dealing with factories that we've had to do this."