Automotive News NADA Show Daily - January 25, 2015 - 8

8 * JANUARY 25, 2015

KRAUSHAAR
continued from Page 6
and we get back to our growth
phase, he's the guy for the job. No
doubt about it.

What is "the other side"? And
how is Hyundai going to get
there?
I believe the Promised Land starts
with a cadence of fresh product that
has already started with the Genesis
and the Sonata, and that was just
the beginning.
That's No. 1. No. 2 is focusing on
differentiated Tier 1 advertising.
Ever since we lost our "America's
most fuel-efficient car company"
message with the whole mpg situation, we have not had a Tier 1 mes-

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sage that defined Hyundai. We've
been out there treading water, not
really going in any direction, and
there's a renewed focus to go in a
new direction. I think that will help
in a big way.
And third, I think we need to improve our relationship with our
captive. When those three things
are humming, Hyundai will be a
pretty formidable car company.
It sounds like Hyundai dealers
aren't entirely satisfied with
Hyundai Motor Finance right
now. What's going on?
Our captive's penetration into the
Hyundai dealer body should not be
the ultimate goal. They want to be a
bigger part of our business. For them
to be a bigger part of our business,

they need to be more competitive.
You know, HMA and HMF need
to be working together. They do
work together in a lot of ways. I
would argue that it would make a
healthier car company if they work
together even more. Right now, we
need to sell cars. We need to drive
traffic. And in the short term, we're
in a position where it may make
more sense as a dealer to just go
and explore alternatives.
Are Hyundai dealers profitable?
Yeah, we're profitable. We were
less profitable in 2014 than we were
in 2013, and that is a disturbing
trend. I don't have any numbers in
front of me, but it's a wide spectrum
among Hyundai dealers. There are
some dealers outperforming the

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market, and there are plenty of dealers underperforming the market.
We have struggled on the fixed side
of the business, which Hyundai has
made a concerted effort to focus on,
and that will help. But I would say,
in general, we are behind the Toyotas and Hondas of the world, and
probably more in line with Nissan.
How is Hyundai working on the
fixed side of the business?
Our fixed absorption has been
generally below the industry average, so the focus is on raising that
fixed absorption.
The million-dollar question is
how you do that. In 2014, the big focus was on the [Car Care Express]
quick-service program. There's
been a very big push to get our customers in and out in under an hour.
Is it working?
It's working. The numbers show
that it's working. Through October,
my customer-pay sales were up 7
percent year-over-year, and my
customer-pay sales as a percentage
of total sales were up 3.3 percent.
What did you think about Steve
Shannon's departure as Hyundai
Motor America marketing chief?
I think Steve was a casualty of the
underperformance of Hyundai.
When sales are robust, marketing
gets the credit. When sales are not
robust, they take the blame.
I don't know who to blame for
this, but I did not think our Tier 1
marketing was effective. I don't
know if it's Innocean's fault. I don't
know if it was Steve or Steve's department's fault. I don't know what
directions they were given. I have
no idea. All I can say is I didn't like it
when it was unveiled, and I certainly didn't like the results.
Can you give an example?
Specifically, I thought the launch
of the Sonata was ineffective. I
don't remember the message. And I
don't remember seeing it too often.

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Over the past few years, Hyundai
dealers have dramatically grown
their certified pre-owned business. How did they do it?
Yes, CPO is on a staggering
growth rate, but that's because it
was coming off a nonexistent base.
We still have not reached the market share on CPO that we have on
new cars, so theoretically, there's
still upside there.
But how did you get to where
you are now?
There's been a focus on the attributes of the program, such as the warranty, and dealers have been focusing on certifieds as a profit center.
I don't know how much of HMF's
rates are being subvented by HMA,
but I think the effort is coming primarily from HMF. The stronger that
the CPO program gets, the better
they do with repurchase risk, the
stronger residuals they have, and all
that good stuff. It's been a fairly
concerted effort.
Hyundai is rolling out a global
dealership design program four
years after a big facilities push
in the U.S. Will the new design
come here?
We're uncertain if that new facility program applies to the United
States market. I think [Hyundai Motor Corp.] wants it to be, but there's

some pressure against it because so
many people just did new facilities
with the blue cube look, and now
they've got this bronze look. I think
we're still fighting it.
Does Hyundai have a dealer
bonus program that rewards
sales?
There's no stair-step program.
There is something called a dealer
performance bonus, which is based
off facility guidelines, minimum
[customer satisfaction] standards
and also what we call a first maintenance complete percentage. That's
a payment based on a dealership's
ability to get new customers back
into the service department.
Have the payouts been stable?
No.
Why not?
It
seems
unpopular
with
Hyundai, like they'd rather take
that money and do something else
with it. I think it's Korea saying this
is an ineffective use of your money.
Do you see an opportunity for
Hyundai to move into new segments?
With my other brands, the small
crossover below a Tucson has been
a segment where there is some demand. And I still would like a minivan. I think we are a family brand,
and we need a people mover. We do
not have a people mover.
What about the three-row version of the Santa Fe?
It's not a real people mover, in my
opinion. It does not replace a minivan. It's not a full-size SUV, like a
GMC Yukon or something like that.
How is Hyundai doing with its effort to build a "channel within a
channel" to sell premium models
such as the Genesis and Equus?
We don't talk about it very much
anymore. "Abandoned" may be too
strong of a word, but they aren't focusing on it. There's just not enough
sales out of there to warrant it.
Was it weird to pamper Genesis
and Equus buyers more than
other buyers?
The showroom within a showroom concept, in theory, might have
been weird if it played out in any sort
of volume. But the reality was, it didn't. Hyundai provided training on
the experience, and most dealers applied that training to their entire
dealership - not just to the premium part of their dealership.
I think the lesson we've learned is,
whether you're buying a $60,000
Equus or a $17,000 Accent, there's
no reason that those two customers
have to be treated differently. Having the Genesis and the Equus gave
us the opportunity to focus on this,
and I think we as dealers need to
give that treatment to everyone.
What are your top priorities as
dealer council chairman?
My No. 1 priority will be to improve Hyundai dealers' profitability
picture. What do I think are the
most important things to reach that
goal? Well, it will change over time
as the market dynamics change, but
I think my focus will be to make sure
that we're able to communicate
with HMA and, more importantly,
directly with Korean management,
as transparently as possible. c

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Automotive News NADA Show Daily - January 25, 2015

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