Hyundai needs to buy the Saturn dealerships and turn them into Genesis/Equus stores

[Sal Collaziano]

Hyundai wants more - and displaced Saturn dealers might just be The Answer.

By Peter M. De Lorenzo

(Posted 10/6, 10:00AM) Detroit. The collapse of the Saturn deal - and ideal - has been devastating to a lot of people. For Roger Penske and his team - who worked tirelessly and almost non-stop over the last several months - it was a tremendous blow. It turns out that an agreement between Roger and Renault-Nissan CEO Carlos Ghosn wasn’t good enough for the company’s board of directors, who questioned why the company would want to supply vehicles to Penske’s dealer network (after the GM agreement expired) to sell against its own Nissan vehicles in this market.

And a done deal that was all but signed, sealed and delivered - complete with a new kickoff advertising campaign and dealer rallies planned for this week - came unglued with one phone call.

But the real devastation occurred to the Saturn dealers, who were completely left out in the cold with no backup plan. After all, with Roger Penske involved they didn’t have to worry, right? He’ll come through and it will be good, right? Yes, some of the best dealers in this business just assumed that it would all be good, and with one bolt of negative lightning they were left standing like houses by the side of the road, with no contingency plan, no “Plan Bs,” no nothing.

A lot of people are going to lose their jobs over this, and this development is a swift kick in the head to these dealers and their families, this after a season of uncertainty had finally looked to be turning into a fall full of promise too.

But some visionary thinking might just provide an answer for these discarded Saturn dealers, and it could blend nicely with Hyundai Motor America’s product plan, which is turning sharply up market.

Already playing in the overly-crowded near-luxury premium segment with its Genesis sedan, Hyundai’s ambitions – which have always soared beyond reasonable projections and in some cases have led to disastrous consequences for both its U.S. executives and its dealers – are about to take off again, because late next year, Hyundai is going to bring its full-bore luxury sedan – the Equus - to these shores.

The Equus will be a full-size, no excuses $65,000 luxury sedan aimed right at the heart of the U.S. luxury market currently dominated by Audi, BMW, Mercedes-Benz and Lexus. Early impressions of the car are positive, with the words “surprising” and “serious” being bandied about. My colleague John McElroy had a very brief exposure to the car and shared similar sentiments with me about it.

Read more...

 

[bjjones]

Thank you very much for the educational article. This is exactly what I have been saying on some my previous posts about Hyundai trying to enter the luxury market without a separate brand name and lack of quality dealer support. I really hopes that Hyundai grasps this opportunity and moves forward.

 

[ajls09873]

And this is where the Saturn dealers come in. I first mentioned this idea on ”Autoline After Hours” last Thursday evening, but if I were John Krafcik, the CEO of Hyundai in the U.S., I’d be calling every top Saturn dealer in the country inviting them to become Equus dealers, because if this moon shot from Hyundai - and make no mistake, this is a moon shot - is going to have a chance of succeeding, then the Equus will need its own highly-distinctive persona completely separate from Hyundai’s mainstream product offerings.

This is a brilliant idea for hyundai.
Saturn brand was end. so, saturn dealers must shift their supplier.
I think most of them want shift to 'value for money' brand - like Hyundai or Kia-. Because saturn was a 'value for money' brand.

Hyundai inviting them to become Hyundai/Kia dealers.

35 % of them shift to Kia dealers.
35 % of them shift to Hyundai dealers.
30 % of them shift to Equus dealers. (choose best saturn dealers)

I think Hyundai should catch this chance.
This is not buy a 'whole saturn brand'.
Just inviting them to become Hyundai/Kia or Equus dealers. or Just buy part of dealerships from GM.
Hyundai must consider this plan.

P.S: i don't know WHAT is the bad thing of 'expand dealerships'.
P.S 2 : I want send this article to Hyundai. But, i don't know their think tank e-mail address.

 

[jwaters943]

Or stand-alone Pontiac/Hummer dealers. You could probably add Chrysler to the list in a few years as well.

One thing is certain, there are a LOT of available existing dealerships in the U.S. that Hyundai could purchase and upgrade. Regarding a separate luxury channel, I say they should start small (e.g. a single dealership in each of the 50 biggest metropolitan areas in the country), and slowly expand to approx. 150-250 dealers nationwide over the next 3-5 years.

 

[YEH]

Thank you very much for the educational article. This is exactly what I have been saying on some my previous posts about Hyundai trying to enter the luxury market without a separate brand name and lack of quality dealer support. I really hopes that Hyundai grasps this opportunity and moves forward.

Again - no one is saying that Hyundai shouldn't launch a separate luxury brand, but as in anything successful, timing is everything (if Toyota had launched Lexus during the 1970s, it either wouldn't be as big of a success or, at the very least, bled $$ for a considerable amount of time until things turned around).

Hyundai/Kia have a lot going on their plate the next 2-3 years, w/ the next 1-1 1/2 years being very important w/ the launch of the new Sonata, Tuscon, Elantra, Optima and Sportage - the "bread and butter" for both brands.

The success/failure of these mainstream models will determine whether Hyundai/Kia join the ranks of the Japanese Big 3 (likely soon to be Big 2) in the US or remain a 2nd tier player for the immediate future.

The successful launch of these models will require significant time and resources from Hyundai/Kia.

Furthermore, China, India and Europe are increasingly impt. to Hyundai/Kia (HK have a leg up on the Japanese Big 3 in China and India and are in the process of surpassing all but Toyota in Europe), and are a big reason why HK are solidly in the black while the Japanese makes are limping along.

But this is no time for HK to sit on their laurels and replacements for the i10, i20, i30, cee'd, etc. need to be developed.

At this juncture, starting a lux brand in the US should be no better than 3rd on HK's priority list (the 1st two being expanding HK's sales and reputation in the US; as well as improving their position in China, India and Europe - not to mention S. America).

These are growth markets (esp. China and India) while the luxury auto market in the US is contracting (luxury makes are putting record amounts of $$ on the hood to move product - and things likely are not going to improve drastically any time soon).

Now, as for (former) Saturn dealers - they are likely soon to be "free agents", and hence, really no need for HK to "buy" any part of Saturn since the dealers would likely be free to join any auto manufacturing willing to have them (recently, there was an Acura dealership in Colorado which converted into a Kia dealership due to the selling of Kias being a more profitable endeavor).

What HK should do is to negotiate w/ "choice" Saturn (as well as Pontiac or other dealerships) which have lost their dealer agreements and turn them into H or K dealerships, w/ the understanding that the best ones (location, condition of facilities) being turned into the dealerships for the new lux brand when it launched (reportedly) in 5-6 years time.

 

[ajls09873]

Again - no one is saying that Hyundai shouldn't launch a separate luxury brand, but as in anything successful, timing is everything (if Toyota had launched Lexus during the 1970s, it either wouldn't be as big of a success or, at the very least, bled $$ for a considerable amount of time until things turned around).

Hyundai/Kia have a lot going on their plate the next 2-3 years, w/ the next 1-1 1/2 years being very important w/ the launch of the new Sonata, Tuscon, Elantra, Optima and Sportage - the "bread and butter" for both brands.

The success/failure of these mainstream models will determine whether Hyundai/Kia join the ranks of the Japanese Big 3 (likely soon to be Big 2) in the US or remain a 2nd tier player for the immediate future.

The successful launch of these models will require significant time and resources from Hyundai/Kia.

Furthermore, China, India and Europe are increasingly impt. to Hyundai/Kia (HK have a leg up on the Japanese Big 3 in China and India and are in the process of surpassing all but Toyota in Europe), and are a big reason why HK are solidly in the black while the Japanese makes are limping along.

But this is no time for HK to sit on their laurels and replacements for the i10, i20, i30, cee'd, etc. need to be developed.

At this juncture, starting a lux brand in the US should be no better than 3rd on HK's priority list (the 1st two being expanding HK's sales and reputation in the US; as well as improving their position in China, India and Europe - not to mention S. America).

These are growth markets (esp. China and India) while the luxury auto market in the US is contracting (luxury makes are putting record amounts of $$ on the hood to move product - and things likely are not going to improve drastically any time soon).

Now, as for (former) Saturn dealers - they are likely soon to be "free agents", and hence, really no need for HK to "buy" any part of Saturn since the dealers would likely be free to join any auto manufacturing willing to have them (recently, there was an Acura dealership in Colorado which converted into a Kia dealership due to the selling of Kias being a more profitable endeavor).

What HK should do is to negotiate w/ "choice" Saturn (as well as Pontiac or other dealerships) which have lost their dealer agreements and turn them into H or K dealerships, w/ the understanding that the best ones (location, condition of facilities) being turned into the dealerships for the new lux brand when it launched (reportedly) in 5-6 years time.

I know they are "free agents" in now.
But, invite them to become 'Hyundai/Kia or Equus dealers' is a good idea.
"do something" is better than "do nothing".

I heard that build a new luxury brand is a very high price. 3 billions dollars, right?
This is a good chance of build new luxury brand by bargain price. this is good timing.

 

[YEH]

How is inviting a no. of Saturn, Pontiac, etc. dealerships to become H or K dealerships (w/ the best to be converted into the new lux brand in 5-6 yrs time) doing "nothing"?

Also, how would these dealerships (if converted right now into, let's say "Genesis" dealerships) stay afloat divying up the 1,800-2,000 monthly sales of the Genesis models, and likely 150-200 monthly sales of the Equus (keep in mind that the LS and 7 Series are currently selling at about a 700/month clip; the A8 is below 200/month)?

Heck, HK haven't even gotten their dealership network straightened out (not having dealerships in many areas; having a good no. of bad dealerships) - don't you think it is a wise business move to straighten out their core business 1st?

Along those lines, HK are likely to spend a small fortune advertising the new Sonata, Optima, Elantra, etc. models the next 2 years - so probably not much $$ left over for a big advertising campaign for a new brand (the Equus rollout is likely to be a "soft" one; probably not a national TV campaign).

 

[ajls09873]

build a new lux brand after 5-6 yrs?
I bet, After 5-6 yrs, after economy recovered, build a new lux brand will freaking expensive than this time.

"No time like the present. Time is flying never to return"

 

[YEH]

^ Uhh, it wouldn't really cost much more to convert the best Saturn, etc. dealerships first into Hyundai/Kia dealerships and then into Genesis (or whatever the new brand is going to be named) in 5-6 years time.

And again - do you really expect a new lux dealer network to survive economically divying up the relatively small sales of the Genesis (end even smaller projected sales of the Equus)?

If I were an auto dealership looking for a new "home" right now - I would much rather go w/ H or K - considering the product coming online the next 2 yrs.

Keep in mind that the albatross around Ford was the billions pumped into its PAG assets when Nasser became overly enamored w/ the high-end market, $$ which could have been better served shoring up Ford's core business.

Setting up a new brand, much less a new lux brand, is a money losing proposition (esp. in a marketplace where the luxury auto market has contracted significantly).

HK have much better uses for their resources in the immediate future - and in 5-6 years time, would not only be in a better position (marketshare and profit wise) to subsidize the launch of a new brand, but also would be in a better position to do it properly.

 

[Par Avion]

YEH is right. Hyundai is NOT going to jump the gun and start buying dealers for a luxury brand launch. They have upcoming product launches of core products to launch and not to mention 'cleaning" up their current dealer network. Heck, the Equus isn't even coming here until late 2010.

When the conditions for them are right, they will create a lux brand; yes Korea wants it to happen but these things take time- the Genesis is barely a year old.

For potential Genesis buyers on the sideline: in the interim either pay the price and lease a Lexus for all your dealer pampering needs or laugh all the way to the bank and buy your lux sedan at a Hyundai dealer.

______________________________

Help support this site so it can continue supporting you!

 

[bjjones]

YEH is right. Hyundai is NOT going to jump the gun and start buying dealers for a luxury brand launch. They have upcoming product launches of core products to launch and not to mention 'cleaning" up their current dealer network. Heck, the Equus isn't even coming here until late 2010.

When the conditions for them are right, they will create a lux brand; yes Korea wants it to happen but these things take time- the Genesis is barely a year old.

For potential Genesis buyers on the sideline: in the interim either pay the price and lease a Lexus for all your dealer pampering needs or laugh all the way to the bank and buy your lux sedan at a Hyundai dealer.

Just as Mr.De Lorenzo so eloquently stated in his article: "Hyundai wants more - and displaced Saturn dealers might just be The Answer", Hyundai has a long history of doing things ass backwards and the failure to promote a luxury brand from the start is really no different from the other bungles Hyundai has committed over the years. Sorry, but I don't see Hyundai meeting their modest sales numbers for the Equus as very few people are going to purchase outright or finance a $50,000 plus vehicle being sold at Hyundai dealerships with a Hyundai badge. Hell, many of the Genesis sedan owners that switched the Hyundai badges and replaced them with KDM Genesis logos probably did so to hide the fact that the Genesis is manufactured by Hyundai! Unfortunately, sometimes making impressions and outward appearances, no matter how shallow, are important to some (Genesis owners that have actually swapped badges, please refrain from posting in regards to why you chose to do so as I said "probably"). And even if Hyundai does successfully sell all of the Equus models here in the USA, most owners will be those upgrading from the Genesis, Hyundai aficionados or short term lease purchases, which does very little to promote the cars image on a long term basis.

Quite frankly Hyundai makes great cars, but the most of the general public is not aware or still skeptical of this fact. Furthermore, the overall the service is sorely lacking at many Hyundai's dealerships and I doubt that the dealer technicians are going to be up to speed to maintain and service the Equus if there are serious problems and salespersons will not be properly trained or have the capability of educating potential buyers with a car this expensive or advanced when it first arrives here in the US.

 

[Par Avion]

Just as Mr.De Lorenzo so eloquently stated in his article: "Hyundai wants more - and displaced Saturn dealers might just be The Answer", Hyundai has a long history of doing things ass backwards and the failure to promote a luxury brand from the start is really no different from the other bungles Hyundai has committed over the years. Sorry, but I don't see Hyundai meeting their modest sales numbers for the Equus as very few people are going to purchase outright or finance a $50,000 plus vehicle being sold at Hyundai dealerships with a Hyundai badge. Hell, many of the Genesis sedan owners that switched the Hyundai badges and replaced them with KDM Genesis logos probably did so to hide the fact that the Genesis is manufactured by Hyundai! Unfortunately, sometimes making impressions and outward appearances, no matter how shallow, are important to some (Genesis owners that have actually swapped badges, please refrain from posting in regards to why you chose to do so as I said "probably"). And even if Hyundai does successfully sell all of the Equus models here in the USA, most owners will be those upgrading from the Genesis, Hyundai aficionados or short term lease purchases, which does very little to promote the cars image on a long term basis.

Quite frankly Hyundai makes great cars, but the most of the general public is not aware or still skeptical of this fact. Furthermore, the overall the service is sorely lacking at many Hyundai's dealerships and I doubt that the dealer technicians are going to be up to speed to maintain and service the Equus if there are serious problems and salespersons will not be properly trained or have the capability of educating potential buyers with a car this expensive or advanced when it first arrives here in the US.

Bjjones, there isn't a car company in this world that hasn't had its fair share of "bungles". You and the Auto Extremist may feel now is the best time for Hyundai to create a lux sub brand, but Hyundai thinks otherwise- simple as that.

The momentum is on Hyundai's side and perceptions of the brand have changes a lot in the last 5-10 years. Yes, they still have a way to go but smart consumers (key word being smart) are ahead of the game, and in my mind, there's nothing better than that.

So again, be patient, or get the so called "prestige" badge someplace else.

 

[sandy]

Based on performance, I give the current Hyundai mgt team lot's of credit. I would not blame them for the company's sins of the past. My background was in marketing and without some insight into the "numbers" it's hard to evaluate the opposing strategies suggested in this thread. My*guess* is Hyundai's thinking goes something like this:

1. problem #1 for our brand is imagery (or lack thereof) It is the major roadblock to the growth of our core business. Everything we do must address this issue.
2. Tfhe potential for our core business is huge based on current market share. The market for value based products we offer has never been stronger.
2. Our genesis/equus line demonstrates our ability to produce world class cars. Like our 10-year warranty, dramatic quality improvements and other innovations, we have done something un-expected and have been rewarded with positive attention.
3. we realize the world does not need another line of world class cars priced at parity with the competition...which would be the case should we market genesis/equus via a separate network of stand-alone, prestige dealerships.
7. Our real opportunity is to use genesis/equus as a strategy to solve problem#1....providing a halo-effect to our models with enormous volume potential. Incrfemental volume/profits generated by genesis/equus, while welcome, are of secondary importance.
8. Korean mgt may be more ambitous about marketing a prestige line/brand, but in North America we must remember who we are and who our customers are.

 

[ajls09873]

Think about it.
If Hyundai is not build new lux brand until Equus launch.
there is no chance of build new lux brand.

If hyundai launch equus without lux brand, then, Hyundai's chance to launch a luxury division will pass.

If Hyundai launch new lux division after 5~6 yrs...

1. Withdraw Equus/Genesis from current hyundai dealer shop. And relocate it. I bet, Hyundai dealers will angry to Hyundai.

2. How can offers 'more premium value' than current Genesis/Equus? they will just rename it, price up, relocate at new dealer shops. That's all. This is only 'dress up'. no substantial change. Do you think consumers will fully understand this? They will laugh at hyundai.

Maybe 2010 is last chance for hyundai. After launch equus without lux brand, then, Hyundai's chance to launch a luxury division will pass. Their timing of launch lexus-like division will not return.

 

[YEH]

^ What do you mean no chance?

Really, have you ever discussed such things w/ people in the auto industry?

And if you had paid attention (or actually knew something about Hyundai's plans), then you would know the launch of the lux brand would coincide w/ the launch of the next gen Genesis sedan/coupe and Equus (along w/ probably 1 or 2 other models; including an upmarket coupe w/ the Tau V12).

 

[Sayantsi]

Hyundai needs to launch a brand, and I think Genesis is the brand it is thinking of. It needs enough product to justify the dealer network, but 1000 dealerships is way to many. Look at Mini, or Lotus - few dealerships, great buying experience, it generally works.

If there are 100 national dealerships, or on average 2 per state, and Hyundai sells 2,000 genesis products per month, that would be feasible. Having Genesis and Hyundai and Kia dealerships next to each other to share service bays and real estate would work, like GM tried to do in its dying days to consolidate brands and lower costs. Each front end can have a unique look and feel, but the system can be shared.

There are something like 4,000 closed dealerships now across North America - there is plenty of real estate to pick from given the desire, and in this economy there's no rush to buy it all up.

 

[dataguy]

There are something like 4,000 closed dealerships now across North America - there is plenty of real estate to pick from given the desire, and in this economy there's no rush to buy it all up.

That's true, especially since many are in areas only zoned for that activity.