JOHN KIEFER: Their profitability is the biggest. Kia specifically has been working with the dealer body to assist with margins. They have also helped with their monthly dealer stair-step program. we saw a revision in January that resulted in lower objectives for most Kia stores and much higher attainment of payment levels for January of 2018.
Kia sales slipped in 2017, but with in-demand products rolling out this year, dealers are hopeful that sales and profitability will tick up.
"We will have a new or largely updated product come in every quarter of '18 and that's on top of the Stinger that we just started receiving in December," said John Kiefer, chairman of the Kia National Dealer Council and president of Kiefer Automotive Group. "Although we were down in '17, that was coming off of years and years of huge increases. We have done a great job of growing the brand."
In January, Kia's overall sales held flat, but because of its bolstered crossover lineup, light-truck sales rose 18 percent.
Kiefer Automotive, based in Eugene, Ore., has four Kia stores: Kiefer Kia in Eugene; Team Kia of Bend in Oregon; Palm Springs Kia in Cathedral City, Calif.; and Team Kia of El Cajon in California. The dealership group also has Mazda, Nissan, Volvo, Hyundai and Subaru stores.
This year, dealers are focused on boosting probability, said Kiefer, 54. Dealers will embrace new and enhanced products and continue to rely on a group of executives — some of whom recently joined Kia — that take dealers' feedback seriously.
Kiefer spoke with Staff Reporter Hannah Lutz.
Q:Kia's U.S. sales declined 8.9 percent in 2017. How were Kia dealers' profits for the year?
A:They trended down. We saw a decline in dealer profitability in general. I think we have seen margin compression across all brands. Kia was down a little bit more than average because of a lack of big SUVs and trucks, which is where the industry really shifted in 2017.
What major issues do Kia dealers face?
I think it's throughput and profitability.
What's missing in the product lineup?
Really just a large SUV and truck. We have a major upgrade to the Sorento coming this year. We were product-constrained in volume for the Sportage last year, so we have a much better flow for the Sportages as well, which is the center of the growth last year. There was also a lot of growth in small SUV, and we were product constrained with the number of Sportages we could import. I think they were allocated to other parts of the world. So, they've really allocated a lot more Sportage volume to North America for 2018.
In 2017, we launched several new cars … the Niro, the Rio and the Cadenza. They weren't in the core volume segments. In '18 we will be focusing on the Soul, Forte, Optima, Sorento and Sportage. Those are all volume segments.
Are dealers confident Kia can hit 5 percent U.S. market share by 2020?
I think that Kia senior management is still very focused on that number and making it happen.
Are Kia dealers happy with the brand's marketing efforts?
Overall, absolutely. We have a new marketing chief. Saad Chehab joined [in May]. I think they're doing some great stuff. [During the 2016 Super Bowl we saw] the launch of the Niro ad with Melissa McCarthy. It was the highest-rated Super Bowl ad ever. They're amazing. That's something that Kia does very well. This year's Super Bowl ad is the launch of the Stinger and it features the lead guy in Aerosmith. He jumps in the car and he's on the race course. All of a sudden, he puts it in reverse and starts flying around backward. He steps out of the car, and he's 20 years younger. The car brings back your youth, I think, is the [message]. Chehab also did that Lamborgini vs. a Forte ad. He's very creative.
What is Kia's primary customer demographic?
They are young at heart. It depends on the vehicle. The Stinger definitely would be older and skews male since it's a performance car. That's why I think Aerosmith is going to reach that person that's in the early 40s to early 60s.
What's your role as dealer council chair?
I represent the voice of the dealers to Kia and to help provide a different perspective or help guide Kia management in how we come to market.What are some of the topics dealers ask you to discuss with Kia management?
It runs the gamut, from dealer stair-step programs to salesperson incentives to advertising to service repairs to communication issues in terms of recalls. Our primary focus as a council for '17 was dealer profitability and vehicle margins. We're making steady progress.
What do you hope to accomplish as chairman of the dealer council?
Continue inroads with dealer profitability and dealer margins. At this point, that is still our primary focus. The other things on the council's list are more meeting to meeting, so it's operational issues as they develop.
Is Kia's program for recalled vehicles fair and adequate?
There is concern among the dealer body about repair times and the reimbursement rate. I think there is concern in all brands and perhaps the concern in Kia is greater than the average brand. There is a belief that Kia's repair times are lower than industry standard for similar repairs of other manufacturers. It's a broad stroke. I hear concerns about repair times with most manufacturers. Dealers and mechanics always want more repair time, and manufacturers are always trying control their costs, no different than any business.
Kia has a very thorough process. They set the repair times. They do repair-time studies. They videotape technicians and they analyze what is a reasonable time a technician can do a repair.
I don't have exposure to stop sales. We haven't had that many and we haven't had cars [down for months, like other brands].
Is there anything that Kia really excels at in terms of its dealer relationships, more so than other brands?
The senior management is extremely receptive to dealer feedback. They have a much closer working relationship with their dealer body than most manufacturers. The senior management is actively in the field. We see a lot more of that with Kia than you do with most brands. They take calls from dealers. They listen when we have concerns, and they actively take the feedback, input and opinions from their dealer body. It's really refreshing. It's always been that way. They are doing as good a job or better than ever today. It ebbs and flows depending on who is in those chairs, but they are really on it and have been over the last year or two. [During part of 2017], they were down the marketing chief position. COO Michael Sprague was wearing three hats. Since Saad Chehab was added [as vice president of marketing in May] and Bill Peffer joined the organization as vice president of sales [in July], they have a full and great management team.
How does Kia help dealers sell EVs?
We only have the one electric vehicle and that's the EV Soul. It's a smaller part of our business than maybe some others. In hybrids we have several: the Optima, the Niro and the Soul EV. The Niro and Optima come in a hybrid and plug-in hybrid. The Niro gets a combined 50 mpg in the standard model. We have seen some ads where they focus on just those hybrid plug-in and hybrid models, but in '18 I'm hopeful that our marketing's main focus will be on the volume segments: Forte, Soul, Optima, Sorento and Sportage.
How does Kia Motors Finance help you stay competitive?
The biggest thing is with subvented leases and APRs. They are aggressive in their buying practices. [At my stores,] we have some great penetration in Southern California and not so much in the Oregon market, which is very credit union heavy. I would guess 60 percent of all new Kias sold are financed through Kia Motors Finance.
How are Kia dealers coping with compressed new-vehicle margins?
We have a renewed focus on all departments, especially fixed operations. When there is margin compression, you have to focus on everything, so you have service, parts, finance, CPO, used-car sales.
Are Kia dealers creating more efficiencies to prepare for a flattening new-vehicle sales market?
That's evolving daily. The only constant in the business is change. We've had some efficiencies in the service drive with tablets, automating and expediting the service processes. We've had certainly a focus on Quick Lube and Quick Lube training. One of our stores was a pilot store for e-contracting. That will be rolling out this year.
Has Kia's control over dealership operations increased or decreased over the last year?
As an industry we see more and more oversight from all manufacturers. I feel like Kia is a lot more flexible than most manufacturers and tries to work with you. They try to get dealer input and certainly council input before they implement new procedures and processes. And they look for ways to collaborate with the dealer body.
I think it's gotten worse as an industry. If you ask me if it's neutral, worse or better [for Kia], I would say there is a little bit more oversight.
In the wake of #MeToo, are Kia dealers stepping up training and such to prevent sexual misconduct — and protect themselves from lawsuits?
We were already in front of that. We are in a consumer-driven industry. Most dealerships have a pretty diverse and large work force that requires strong processes in diversity training. I think as an industry we are pretty ahead of most in that regard. We make sure that everybody takes the diversity training every year. We also have a notification to HR or senior management through Compli. So if someone isn't comfortable talking to their superior, their superior isn't involved in it; they have other outlets. Even before the #MeToo movement, most of the groups I know don't have a choice. There's zero tolerance for it.
