Steve Hinkle, chairman of the Volvo Retail Advisory Board, says the success of the redesigned XC90 crossover shows that the brand is on the right road.
Hinkle, 55, owns Volvo San Diego in California and has been a Volvo dealer for more than 30 years.
A major concern for U.S. Volvo dealers is whether parent company Geely will try to sell its new Lynk & CO brand's vehicles directly to U.S. consumers. Volvo dealers oppose any attempt by Lynk & CO to circumvent the dealer franchise system, including asking Volvo dealers to service the vehicles.
Lex Kerssemakers, CEO of Volvo Car USA, has told dealers that it is too early to address such concerns. But Hinkle said the dealer network has told management, "You can't have it both ways." Hinkle spoke with Staff Reporter Diana T. Kurylko.
Q. How was 2016 for Volvo dealers?
A: 2016 is a better year for Volvo dealers as compared to 2015 or prior. We've seen an overall improvement in our business over the year.
What's the reason for that?
The XC90 having a full year of availability throughout the country -- the demand for it has driven and improved our sales. In the last few months, we have seen a little bit of lack of availability of the product so we have seen a leveling off in the last quarter.
What problems do Volvo dealers face?
The No. 1 issue that all of us are facing is this desire and drive to be a first-tier luxury brand. What is the cost and how we are profitable and what are the tools we need to achieve true luxury status?
What will it take?
It takes a large investment from the individual dealers within the next year in all areas. There is a facility requirement and expectations for staffing, training and technology -- all of the variables needed to achieve those levels of luxury that consumers expect. It takes a large investment by dealers and from the factory.
Are Volvo dealers in a position to make those investments?
A large number of the dealers are in a position to make those investments and have started. There are still a good number of dealers that are struggling to make that investment. The steps you have to take to get there are a bit daunting. It is a big move for this brand to move from a middle-level European to this high brand.
What do Volvo dealers know about Lynk & CO, the brand Geely plans to launch in the U.S. in 2018?
We have limited information about Lynk & CO. It is a brand under the Geely holding company. It is not a Volvo brand. It was designed or conceived in a collaboration between Volvo and the Geely team. We do not have a lot of clarity on what they want to do. They are considering or planning to sell in other parts of the world without a dealer body. We will share a platform with the XC40.
What concerns has the dealer board expressed about Lynk & CO?
There is some concern on the part of the dealer body. More than anything, like the election, it is the unknown. According to Lex [Kerssemakers, CEO of Volvo Car USA,] and everything we have heard, we have nothing to worry about. We are willing to wait and see.
What if Lynk & CO goes around the U.S. dealer franchise system?
We are opposed. We continue to believe that the franchise system is the best method for a manufacturer to offer products and services to the consumer. For over 100 years, franchised dealers have done an extraordinary job representing the interests of the manufacturer and the consumer and we continue to add significant value to the process. All parties are well served by the continuation of the current franchise system. Engaging the Volvo network for all future business concepts would give Geely the greatest opportunity for success in the U.S.
What if U.S. dealers are asked to service Lynk & CO vehicles sold outside the dealer network?
There would be resistance in this country if they are going to ask the dealer network to participate on any level with the brand. If you ask us to service the cars, there will be resistance. You cannot have it both ways if you bring a new brand. Keeping us out of the sale equation will not endear them to the Volvo brand. Tesla has had some success in some parts of the country and I have seen they have service issues.
Every brand has a service capability and parts warehousing to address drivers' concerns. If you want to tap in, there has to be an equitable relationship.
What does the redesigned XC90 large crossover's success reveal about Volvo's path?
The XC90 product for us, going back to the earlier model, was a runaway success and it drove the Volvo brand to its highest levels in this country after its introduction. The good will of that product carried us to where we are today. It took them far too long to do that. It was not that they did not want to do that -- it was the ownership changes from Ford to Geely.
What they were able to finally do is bring a car that is everything you read about, incredibly well designed and good looking. It is a car that consumers recognize the value in. It sets the standard for what Volvo represents today and all the products that come after it. All consumers will expect that design and technology in future cars and how you package that in all segments and price points. If they continue down that line we will have tremendous success.
Will the other 90 vehicles -- the V and the sedan -- be as successful?
I think the cars themselves, the new sedan and wagon, are incredibly well designed and engineered, and working on the same platform as the XC90 they represent the best of Volvo today. The problem for us, because we are known for the XC line and the utility of our vehicles, is that we are not readily considered in the sedan market as being as competitive. If people would take the time to explore our cars -- the S90 vs. the Mercedes-Benz E class and the Audi A6 -- they would be incredibly pleased with what Volvo has introduced in the market. We have a lot of work to do.
How about the XC40 coming soon? Will it be competitive in the compact crossover market dominated by the giants?
That is a thrilling car for us. We can't wait. To make the transition from where Volvo is to the luxury level, you need a few cars that are in demand. You can't make it on one car. There are three products and one thing that all the brands have is an entry level car and crossover. The XC40 will hit a real sweet spot as an entry car.
What's missing in the lineup?
My father and I are also owners of a Subaru franchise and I was looking at the numbers and the plan for 2017. They generate their business on three models, Outback, Forester and Crosstrek -- all utility-type cars and selling in high numbers in our market in Palm Springs. You could argue that when we have our XC60 and XC40 and our large-platform XC90, we have an adequate stable of cars to sell 100,000 cars in the United States. A car smaller than the S60 -- that would be the last one.
What do you hope to accomplish as dealer council chairman?
One, that the factory recognizes the real value that the dealer network brings to their efforts in any network, but certainly in our country; and two, everything centers around the ability of the dealer to make a good profit and the greater good of reinvesting in the business to compete with these brands that have not had to go through a transition period or ownership change that we have.
Service business should be up. How should Volvo help its dealers handle more service business?
Service business is up for most brands in the United States because the market was up. In the last 10 to 12 months, we are increasing our units of operation. We were in a downward curve. What has changed is the makeup of the work. The service intervals are longer, the nature of warranty work is different -- it used to be a broken part and you could put it back in. Today, it is a complex electrical concern or software update that is necessary. The complexity is greater than it was. My concern with all brands is that we are properly reimbursed for the work we do.
What can the factories do?
They need to take a hard look at their reimbursement rates. Volvo has. We made it an issue, and they have made adjustments. It is a hot topic and it has stayed top of mind.
Are dealers concerned about Volvo adding dealerships?
Volvo has been steady with the dealer count for a few years. There were a couple of markets that were vacated in the depth of the recession. It's not a concern that they will start to place a lot of Volvo points. We have been discussing throughput and how important it is to Volvo. We need to get all of our dealers selling a lot.
Will leasing increase for Volvo in 2017?
There will be a continued push for us to lease more cars. That is a natural aspect of the luxury-car business. It is what drives the numbers.
Are inventory levels a concern?
Inventory levels have been high in our legacy cars; that has been a concern. On the other end, we were a little too light on the XC products. Volvo has made an effort to get them in line.