Hyundai Chief: Automaker Arrogance Hurts Dealers' Profits

DEARBORN — Hyundai Motor America's chief operating officer says the “arrogance” of auto makers has put many U.S. dealerships in an unprofitable position — a situation that requires new action and not just more lectures from manufacturers.

In a blunt assessment, COO Steve Wilhite takes car makers to task for flooding dealers through over-production and not for giving retail sellers enough flexibility to order vehicles that customers want, leaving dealerships to push products through sales incentives.

“If we're not capable of selling the value of our brand … why in the hell do we expect our dealers to sell the value of our brand,” Wilhite says. “This is crazy.”

Speaking here Tuesday at the Automotive News World Congress, Wilhite notes Chrysler Group's recent oversized inventory, Ford Motor Co.'s efforts to cut more than 600 Ford, Lincoln and Mercury dealerships, and General Motors Corp.'s elimination of 3,000 Oldsmobile dealerships just a few years ago.

“It never should have come to this. We know better in this industry. This isn't rocket science,” he says.

But Wilhite doesn't spare his own company from criticism. He points out that 24% of potential customers leave Hyundai dealerships because of a poor experience.

Wilhite hopes new initatives, including new a simple telephone survey to track customer feedback, will help change that.

Soon, every Hyundai buyer will get a survey call asking them to rank their dealer experience on a scale of one to 10. The customer reaction will be recorded and forwarded to dealerships. Those customer rankings will be a direct tool in monitoring dealer performance, he says.

“We're not going to try to tell dealers what to do,” he says, noting the effort is to provide dealers with timely and unvarnished feedback from consumers.

At the same time, Wilhite says Hyundai needs to do what it can to help dealers achieve better per-vehicle margins. The Korean auto maker has a four to five year goal to increase its U.S. dealer net return on sales profit from the current average of 1.6% to 2.5%.

“For every $100 (dealers) sell, they make less than $2 pre tax,” he says, noting that most sofa and jewelry stores make higher margins than car dealerships.

While the initiatives may not remedy all the problems Wilhite cites, “they're a start.”