Genesis split remains an open wound

Hyundai Motor America and its dealers still are struggling to resolve differences over the spinoff of the Genesis retail network.

Tensions flared at a dealer council conference in Dallas this month when attendees briefly walked out of a meeting with executives including Hyundai Motor America's newly appointed CEO Kenny Lee and COO Brian Smith.

The incident — recounted to Automotive News by numerous people familiar with the proceedings — reflects rising frustration among Hyundai dealers who carry Genesis products and conflicting views of what role they will play in the Genesis retail network.

The walkout came after dealers were told of a potential decision by Hyundai to open points of sale for Genesis stores in select locations to non-Hyundai retailers, according to the sources. Dealers also were frustrated by how much Hyundai plans to compensate dealers who no longer will be permitted to sell Genesis vehicles, the sources said.

Members of the dealer council left the meeting en masse, citing the need to talk privately. Eventually, they rejoined the meeting, and talks continued, sources say.

Hyundai declined to confirm these accounts of the meeting.

"One of the best things about this closed process is the candid approach taken by the dealers and company personnel allowing us to speak openly and freely and reach mutually agreed upon decisions," the company said in a statement to Automotive News. "At this particular meeting, during a conversation on the Genesis brand, the dealers asked to have further discussions on the topic, which already are taking place."

The discussions follow Hyundai's decision in August to abandon plans for a gradual phase-in of new Genesis dealers and of the Hyundai and Genesis retail networks by one to two years.

Many Hyundai dealers had hoped to add a Genesis franchise, something that is increasingly unlikely given Hyundai's goals for the Genesis dealer count. They already are permitted to carry the Genesis G80 sedan and more than a third of them had invested in facility improvements and training to qualify to sell the top-of-the-line Genesis G90. The new luxury marque also would give them a chance to earn higher profits.

Hyundai Motor America, meanwhile, remains laser-focused on vaulting the Genesis brand into the top luxury tier and narrowing its Genesis retail footprint to a small number of stores in key markets — even if it means ruffling feathers within the current retail network.

About 352 Hyundai stores sell the Genesis G90; sources familiar with Hyundai's plans say the automaker wants that down to as few as 100.

Hyundai Motor America promised that a resolution of the Genesis retail question would be announced last August, but no clear plan has been articulated; Hyundai hopes to resolve the issue by April, sources say.

A swift resolution is important for all parties. The new Genesis G70 sports sedan — a volume-oriented model that's expected to kick-start sales and brand awareness — is due in the U.S. in the second quarter of 2018. After that, a succession of models crucial to the brand's success will roll out, including a trio of crossovers and a coupe.

"The company's intent has always been that Genesis vehicles will be sold exclusively through a distinct Genesis dealer body that is profitable for dealers and will deliver the luxury experience Genesis buyers expect," Hyundai said. "Both the company and the dealers are in complete agreement that this is critical for the success of the Genesis brand and the dealer body."