#DealerNews

You would think you’d be happy when a peer succeeds and goes on to greater things, but the reality is often a little grimier and less magnanimous. Genesis has been a sore subject around Hyundai Motor Company ever since the automaker spun it off into its own brand. However, this has less to do with its role as an elite nameplate and more about how to manage it as part of the greater whole.

Earlier this month, dealers expressed their dismay by walking out of a meeting with Hyundai Motor America’s executives — which included CEO Kenny Lee and COO Brian Smith. The incident didn’t last particularly long and the conference eventually got back on track, but it proves there’s unresolved issues as to how the Genesis brand should be handled.

A quartet of suspected baddies were arrested on Friday after being caught with four vehicles believed to be stolen from a Tesla dealership in Salt Lake City. While an automotive theft ring isn’t anything special, the way in which this particular incident unfolded is beyond strange.

According to South Salt Lake police detective Gary Keller, the incident began around 1 a.m. when a Highway Patrol trooper conducting a traffic stop near the dealership noticed a sparkly new Tesla vehicle stop behind his squad car. Smelling something fishy, the patrol trooper assumed the driver wasn’t the owner of the car and called for local backup as he conducted another stop.

Keller said the man had a bag of keys on his person and told police he had come to return the vehicle to the dealership. “I don’t know if he had a guilt complex or whatever, but he claimed his name was Tesla and once [police] started talking to him, he didn’t want to talk to police; he wanted an attorney,” Keller explained.

The 60-day auto delinquency rate continued to climb through the third quarter of 2017. Driven primarily by “relaxed” underwriting standards from years past and increasing subprime originations, TransUnion’s senior vice president and automotive business head, Brian Landau, said two-month payment lapses rose 7 basis points to 1.4 percent.

At the same time, the average balance of outstanding auto loans increased by around 5.9 percent, resulting in the lowest year-over-year growth rate since the third quarter of 2012. The group’s Industry Insights Report cited this quarter’s serious auto loan delinquency rate as the highest observed since Q3 2009 — you know, when nobody had any money to pay their bills.

Roughly 8,000 U.S. dealers will share in a $335 million payday resulting from a colossal 2010 antitrust investigation. The issue? Suppliers were involved in a widespread price-fixing scheme that lasted decades, and nobody noticed until the FBI raided the offices of Yazaki North America Inc., Denso International America Inc. and Tokai Rika Group North America.

In the end, 65 individuals and 47 companies were charged by the Justice Department — resulting in over $2.9 billion in fines and jail time for a swath of fresh white-collar criminals.

However, none of that money made it to manufacturers, dealers, parts retailers, or consumers. Those players had to resort to filing civil suits in federal court against the companies. In 2012, the multitude of claims were consolidated and transferred to Judge Marianne Battani and the U.S. District Court in Detroit. Over $1 billion has been set aside for affected parties, with around $335 million of the sum going to dealerships.

A new type of sales fraud is taking advantage of lenders’ and dealerships’ automated payoff systems. Basically, criminals have begun selling high-end used vehicles that have been obtained illegally and vanish before anyone is the wiser.

Mark Maida, the CEO of AutoBuy, has said his Florida-based company was on the receiving end of the scam in 2016 and wants to warn other prospective buyers before the same thing happens to them. He doesn’t believe it was an isolated incident and claims there have been other dealers and lenders across the state that have been affected by the swindle.

Imagine a traditional luxury car buyer — yes, some still exist — walks into his or her local Cadillac dealer to check out the radically refreshed 2018 XTS. Naturally, the old XTS is hanging out in the parking lot, quietly serving as potential trade-in. After entering the dealer, a salesperson ushers our buyer over to a virtual reality machine to check out the many glories (and options) that await in the new model.

On the way to that machine, the buyer passes zero Cadillacs. There’s not a CTS or CT6 or hot-selling XT5 in sight. An unlikely scenario? Perhaps. A little weird? Certainly to a repeat (read: aged) buyer. It seems small Cadillac dealers definitely felt that way, as low-volume sales locales soundly rejected head office’s plan to do away with traditional showrooms and physical cars.

As a result, Cadillac has given the ominous-sounding Project Pinnacle a makeover.

Last month Volkswagen announced it had significantly upgraded its warranties and, not a week later, Hyundai gave word that it was making a big announcement on October 10th. As the brand with the most extensive factory coverage in the business (along with Kia and Mitsubishi), we expected them to respond assertively.

The gauntlet had been thrown down and it was time for Hyundai to remind VW who the world’s value leader was. What would the response be? One million miles of bumper-to-bumper coverage? Free hats? We were ready for anything and everything.

The announcement came and Hyundai is now promoting its new retail program, called Shopper Assurance, which allows you to schedule a test drive via the internet, browse dealer inventories online, and offers a three-day money-back guarantee. Needless to say, it’s slightly disappointing, but it isn’t all bad news.

For over a decade now, Kia has slowly but surely been moving toward doing the impossible —transitioning the brand image from “ subprime, budget, shady, and non-desirable” to “a slightly Buick-ized version of Hyundai.” In order to do this, Kia dealers have always relied on the one factor in their favor, which is the ability to sell on price. While the MSRPs on Kias aren’t too far off the competition, the stores have historically dumped new inventory at prices well below the sticker. Looking at an Altima? Why not try this Optima at $3,000 off instead?

Of course, when you operate this way, it makes it difficult for salespeople and managers to make any money, since there’s little to no profit in the deal. For over a decade, Kia has offered sales staff what’s known in the business as a “spin” every time they sell a new car — they can call into a number or log on to a website and enter a VIN-specific code for a “spin” and a chance to win a bonus that ranges from $25-500 per car. If you sell Kias for a living, this is likely how you’ve been paying your bills for as long as you can remember.

According to sources within Kia dealerships, a little over a month ago, without warning, Kia stopped its OEM incentive program for management. Then, for October, again without warning, Kia stopped the spin program for sales people, also with no explanation. Rumor has it this decision comes from the new VP of Sales for Kia Motors America, Bill Peffer, who came to Kia from a dealership group in the Pacific Northwest. Dealers tell me that they’ve repeatedly e-mailed their corporate contacts for explanation, but none is expected.

Other than a sharp increase in the mortgage foreclosure rate for Kia dealer employees, what does this mean for Kia in the States?

Over 25 percent of the used vehicles sold through eight CarMax locations in the United States had recall defects that were not addressed, according to a recent safety report.

The 2017 study, conducted by the Center For Auto Safety, the Consumers for Auto Reliability and Safety Foundation and the MASSPIRG Education Fund, noted that vehicles with unresolved safety recalls had more than doubled since 2015 at the five locations surveyed in both years. That is worthy of a raised eyebrow or two.

Questions remain, however. While the review cites numerous locations selling vehicles with what many would consider unacceptable issues, we don’t definitively know if this is indicative of CarMax as a whole. But lets face it, there were 64 million vehicles recalled for safety problems last year — exceeding the total for the previous three years combined.

Car dealerships are an American institution. Often controlled by a patriarch with an unusual amount of sway in the local community (and their sometimes cosseted children), dealer franchises dot the country’s landscape like moles on a back. Isolated near exit ramps, they serve as gleaming beacons of civilization as you traverse through long expanses of wilderness on a road trip.

North America wouldn’t be the same without them but, according to one automotive regent, irreparable change is coming to the dealer networks we’ve become begrudgingly accustomed to. Bill McDaniels, president of McDaniels Automotive Group, runs a half-dozen stores selling selling Acura, Audi, Porsche, Subaru, and Volkswagen-branded vehicles in South Carolina. He’s one of those automotive viceroys mentioned earlier, right down to having his son as the chief operating officer for his business, and he’s convinced the era of family-owned dealerships is almost over.

Is this one man’s paranoid delusion or an astute observation of industrywide trends?

Florida-area car dealerships are annoyed that insurance companies pulled the plug on policies earlier this week, fearing further hurricane-related payouts as Hurricane Irma approaches the coast. Insurers, including Progressive and Allstate, are reacting to losses incurred in Texas during Hurricane Harvey’s assault last month.

While this is standard practice for some companies, it isn’t a universal trend. State Farm, for example, said it would continue offering coverage until after a national hurricane advisory had been issued.

While there are dealerships that will happily service your vintage automobile, there are reasons a lot of classic cars are wrenched at home or taken to speciality shops. It’s not typically in a service center’s best interest to hunt down rare discontinued parts and train employees on the reassembly of carburetors. But it still happens, especially among premium brands.

Porsche is rather obsessive about its heritage and has extended that to maintenance and repairs at a large number of stores. It isn’t alone, either. Mark Rogers, a 20 Group consultant with the National Automobile Dealers Association, estimates as many as 1,800 U.S. franchised dealerships are willing to service vintage cars. Some are even selling them — putting desirable classics on the showroom floor in the hopes they might garner positive attention.

Through Sunday morning, Harvey continued to unleash record levels of rain upon Texas, causing biblical flooding. The situation is so bad that the National Weather Service warned of “additional catastrophic, unprecedented and life threatening flooding” into the next week, and placed flash-flood emergencies for the entirety of Southeast Texas.

Harvey was the strongest storm to hit the United States since 2004 and has already trapped countless individuals, both in their homes and on the road as the rain has turned several major highways into man-made rivers. In some areas, the waterline is high enough to reach streetlights.

Like all companies, auto dealerships are in the business of making money and dealer-installed options are frequently a good way to markup a vehicle’s final price. While that’s great for shops, new cars don’t really need rustproofing or fabric protection. Of course, that doesn’t keep salesmen from occasionally tacking those services on for a few hundred dollars extra though.

One optional extra you actually may want to take advantage of is VIN etching. While this is something you can do at home for cheap, most dealers will gladly do it for a significantly larger fee. But it doesn’t do you any good if the store doesn’t actually follow through with the service and charges you for it anyway — which is exactly what happened at a Nissan dealership in New York.

Nissan of New Rochelle was caught charging customers for an unwanted VIN etching service that they frequently didn’t even apply to cars. Now the dealer has agreed to pay nearly 300 customers more than a quarter of a million dollars in restitution and issue a public apology for its shady practices.

Daimler announced in February that it would stop sending gasoline-powered models to North America this summer and move exclusively to EVs after inventory levels decline. Dealers had until the end of June to decide if they wanted to be a part of the next wave of personal mobility.

With Smart swapping to electric-only drivetrains for U.S. retailers, we assumed the majority of Mercedes-Benz dealers still clinging onto the microscopic Fortwo would abandon it — as would every standalone Smart store still in existence.

Smart only sold 54 electric models within the United States between January and May, so it’s understandable that this summer saw over two-thirds of all retailers opting out of the deal. That leaves Smart with only 27 sanctioned stores within the United States, making it more exclusive than Lotus, Ferrari, Lamborghini, and even Rolls-Royce.