Special Coverage

NADA Convention & Exposition

LAS VEGAS – Steve Wilhite is a dealer advocate and, at a conference that’s part of the National Automobile Dealers Assn. convention here, he defends dealers by calling for higher profit margins and slamming auto makers for treating dealers badly at times.

It’s typical stuff heard from dealers year after year at the annual NADA gathering.

But Wilhite, Hyundai Motor America’s chief operating officer, is not a dealer. Rather, he’s in the camp of what dealers call “the factory,” a collective and sometimes pejorative term for auto makers. His decidedly pro-dealer comments at a J.D. Power and Associates roundtable are not the kind usually voiced by auto executives.

Citing a J.D. Power survey, he says 25% of customers leave a dealership without buying due to mistreatment.

Many auto executives would nail dealers for that, but not Wilhite. He blames an industry pecking order in which auto makers abuse dealers and dealers, in turn, take it out on customers.

“Do we treat you the way you treat customers?” he asks conference attendees. “Do we transfer our cost reductions to you? When we miss sales targets, do we increase training and marketing, or just increase production and incentives?”

If dealerships manipulate customers to buy vehicles they are not particularly interested in that are lingering on the lot, Wilhite blames the auto makers for pushing slow-sellers on dealers in the first place.

“We put all sorts of financial and institutional pressure on you to act this way,” he tells dealers. “We say we want you to sell the value of products, then we go and slap a $2,000 to $3,000 rebate on a car. If we’re not selling the value story to you, how can we expect you to sell it to your customers?”

He also raps auto makers for periodically keeping dealers in the dark about upcoming deals and programs that might ease their inventory costs.

“The prevailing attitude is ‘buyer beware,’” he says. “Unfortunately, it’s also ‘dealer beware,’ because if you buy today and miss out on a deal tomorrow, too bad.”

Although dealers are selling complex, big-ticket items, they are earning profit margins less than if they sold sofas, says Wilhite, who has been critical of his own company.

Exclusive Hyundai dealers earned 1.9% net profit on vehicle sales last year, while those dueled with other franchises earned 1.6%. He says the goal is for dealers to reach a 2.5% margin by 2008, with Hyundai executives’ bonus pay tied to that target.

Among ways to nudge up margins is to cut dealer marketing costs and divert the savings to gross profits, says Wilhite, a former marketing executive for Nissan North America Inc. and Volkswagen of America, where he led the development of the “Drivers Wanted” ad campaign and the launch of the new Beetle.

He praises Jim Press, head of Toyota Motor North America Inc., for giving dealers their due at every opportunity.

“Jim Press is not capable of starting a speech or a memo without praising dealers,” Wilhite says. “Is it a coincidence that Toyota is where it is today?”