Hyundai of Lansing closes their doors

[XDCX]

A newspaper report indicates that Hyundai of Lansing closed their doors and Hyundai does not have any immediate plans to appoint another dealer to the market. For the full report - click here

The report indicated the Hyundai dealership was owned by a dealer who once owned two Saturn Dealerships and converted the Lansing location to Hyundai when the Saturn brand was terminated. (She sold the other Saturn location which then became a Nissan point.)

It seems strange to me that a dealer who could survive the loss of two Saturn stores and managed to navigate through 2009 and 2010 would end up having to close a Hyundai store in 2013. There must be more to the story.

If nothing else, wouldn't a Hyundai point in Lansing have some Blue Sky value? Lansing is the sixth largest city in Michigan with a population of 114,000 people - it's not even close to Detroit and doesn't share the same problems that plague the city of Detroit.

I know some Hyundai dealers have complained about allocation issues and the difficulty associated with getting enough cars to sell, but even if there were inventory constraints it would still seem that a single point dealer in a market with 114,000 customers could survive.

Is there more to this story or are there still some markets where dealers are struggling even though the national market seems to be fully recovered?

[mryan55]

I am kind of surprised. I grew up in the rural nothing surrounding this area and the Saturn dealerships were quite successful. Lansing is a large market... the Ingham + Eaton County/Lansing metropolitan area is third in Michigan after Detroit and Grand Rapids... Ingham County is very import friendly in the grand scheme of Michigan.

The closest dealers are both over an hour away, so I would be shocked if the point wasn't filled.

Unfortunately I don't know the "rest" of the story -- but like you said, there must be bigger issues here.

[tnpartsguy]

One of the problems that I know about is the newer Hyundais are good enough that there isn't enough service and parts business to cover much of the overhead. The old crappy ones are either scrapped, or not coming back to the dealership for service. Couple that with low/slow allotment and it's no wonder a stand-alone store can't make it.

[XDCX]

Originally Posted by mryan55

I am kind of surprised. I grew up in the rural nothing surrounding this area and the Saturn dealerships were quite successful. Lansing is a large market... the Ingham + Eaton County/Lansing metropolitan area is third in Michigan after Detroit and Grand Rapids... Ingham County is very import friendly in the grand scheme of Michigan.

The closest dealers are both over an hour away, so I would be shocked if the point wasn't filled.

Thanks for the information.

I didn't know much about Lansing so I looked it up on Wikipedia last night and I was mostly impressed with the demographics. There's definitely enough people and enough money in that market to support a single Hyundai dealer.

Originally Posted by mryan55

Unfortunately I don't know the "rest" of the story -- but like you said, there must be bigger issues here.

I read some of the comments following the story and it appears the employees were given no prior notification and the quality of service the dealership offered had been dropping off from the level that used to be provided back in the Saturn days.

Both Hyundai and the dealer state that it was a voluntary termination - that leaves the flooring source as the only logical source for forcing the closure of the store. That said, if it was a flooring issue wouldn't it make sense to keep the store alive and find a new buyer who could capitalize the store?

In fairness, it's all just speculation on my part. Maybe the dealer got tired of losing money and just decided to close the store? Then again, why close the store and lose everything if there's a buyer out there who likely would have bought assets at market value and paid Blue Sky?

[XDCX]

Originally Posted by tnpartsguy

One of the problems that I know about is the newer Hyundais are good enough that there isn't enough service and parts business to cover much of the overhead. The old crappy ones are either scrapped, or not coming back to the dealership for service. Couple that with low/slow allotment and it's no wonder a stand-alone store can't make it.

Great comment - I agree on both counts that the new Hyundais are probably so reliable that they generate minimal repair revenue and the old Hyundai's are so worthless that they'll never darken a Dealer's Service Drive.

I'd also be curious to hear from a Fixed Op person about Hyundai/KIA customers and the amount of money they're willing to spend to keep their vehicles maintained. I've always heard that Toyota, Honda and Mazda customers spent a lot more money keeping their cars maintained at the dealer than the customers who bought from GM, Ford and Chrysler.

Are the Hyundai/KIA service customers more like the customers for the top Japanese brands or are they more like the Domestic brand customers?

If this question gets some posts I'll split it off and create a new thread.

[Moshe @ Performance Brokerage Services]

Michigan has always tilted towards domestic brands. Nonetheless, and not knowing the rest of the story, the Hyundai stand-alone in Lansing with over 100,000 population, should have done real well. I wish they had called us to help them before they shut the dealership down.

As for the comments above regarding the viability of a stand-alone Hyundai dealership - as new car dealership brokers who work in the trenches daily, we have seen a dramatic increase of inquiries from prospective buyers searching for the brand. And although the bloom is off the rose a bit from 2012, the brand is still in VERY high demand.

The Hyundai dealerships that have recently changed hands, commended very high goodwill values that at times even surprised us. Additionally, most of our Hyundai dealers/clients are very happy with the franchise.

A couple of recent stories worth sharing: (1) a dealer/client with a stand-alone Hyundai that is not image compliant, selling 30-35 new cars per month, rejected from us a goodwill offer of $5M (2) A dealer/client who owns a large group, has recently shutdown a Nissan dealership in a major metro market to replace it with Hyundai.

Happy Thanksgiving Holiday to you all.

Moshe Stopnitzky, President
www.performancebrokerageservices.com

[DealerEx]

Originally Posted by Moshe @ Performance Brokerage Services

A couple of recent stories worth sharing: (1) a dealer/client with a stand-alone Hyundai that is not image compliant, selling 30-35 new cars per month, rejected from us a goodwill offer of $5M
Moshe Stopnitzky, President
www.performancebrokerageservices.com

all I can say is WOW! Sounds like at least one party to that deal was a fool...can't say which for sure, but I have a strong opinion...lol

[XDCX]

Originally Posted by Moshe @ Performance Brokerage Services

Michigan has always tilted towards domestic brands. Nonetheless, and not knowing the rest of the story, the Hyundai stand-alone in Lansing with over 100,000 population, should have done real well. I wish they had called us to help them before they shut the dealership down.

Moshe,

Thanks for sharing your insight.

I think this is a great example of why a Dealer should always consult with a broker before they sell or close their dealership. Even if Hyundai of Lansing was performing poorly I have to think there's an existing Hyundai Dealer out there who has had great success with the franchise and would like an opportunity to expand by purchasing another dealership.

As you've mentioned in the past, Dealers who are in the market to buy stores are less concerned with a dealership's historic performance and more focused on how the store will perform once they've instituted their management team and their controls.

Originally Posted by Moshe @ Performance Brokerage Services

A couple of recent stories worth sharing: (1) a dealer/client with a stand-alone Hyundai that is not image compliant, selling 30-35 new cars per month, rejected from us a goodwill offer of $5M (2) A dealer/client who owns a large group, has recently shutdown a Nissan dealership in a major metro market to replace it with Hyundai.

Wow, that's impressive on both counts.

Five Million in goodwill for a Hyundai store that's only selling 30-35 per month in a non-complaint facility would seem to be an amazing offer - I'm surprised the owner rejected the offer but it speaks to the value of a Hyundai franchise.

Concerning closing down a Nissan store and replacing it with a Hyundai franchise, that's also amazing and speaks to the value of the Hyundai franchise.

[steve_biegler]

Originally Posted by DealerEx

all I can say is WOW! Sounds like at least one party to that deal was a fool...can't say which for sure, but I have a strong opinion...lol

My vote is there were 2 fools!

[keydiesel]

She tried selling for several months before closing, the Toyota dealer was going to buy the franchise but not the property, he wanted to move it to a vacant building that was less than a mile from the Toyota store but the city of Lansing wouldn't allow it, some sort of a zoning issue I believe.

[XDCX]

Originally Posted by keydiesel

She tried selling for several months before closing, the Toyota dealer was going to buy the franchise but not the property, he wanted to move it to a vacant building that was less than a mile from the Toyota store but the city of Lansing wouldn't allow it, some sort of a zoning issue I believe.

keydiesel - First post - Welcome to DealershipForum.

Thanks for the information concerning Hyundai of Lansing. It's interesting that the dealer almost had a buy/sell finalized but the deal fell apart because the potential buyer wanted to move the franchise to a different location.

I don't know whether she was using a broker to help her find a buyer and/or structure a deal but I'm betting she tried to sell the store on her own. It's too bad because I still think there would have been buyers for that store even if there was some negative equity in the real estate.

[keydiesel]

Thanks for the welcome!

She did try selling it on her own, sent letters out to all of the other dealers in town. They had a really nice facility in Grand Ledge but Sundance Chevrolet and Grand Ledge Ford are within eye sight of her dealership and it's hard to compete with them, especially in the uc sales. Their service department stayed pretty busy with loyal Saturn owners and GM even allowed them to continue to do warranty work for several years after Saturn was gone.

They were pretty busy when they were a Saturn dealer and had a decent reputation so they never advertised much, she ran the Hyundai dealership the same as she did when it was Saturn and it just didn't work.

[mryan55]

Growing up in the area, I remember the ever so classy Sundance Chevrolet ads. I'm sure they have remained pretty much the same? Haha.

[XDCX]

Originally Posted by keydiesel

She did try selling it on her own, sent letters out to all of the other dealers in town. They had a really nice facility in Grand Ledge but Sundance Chevrolet and Grand Ledge Ford are within eye sight of her dealership and it's hard to compete with them, especially in the uc sales. Their service department stayed pretty busy with loyal Saturn owners and GM even allowed them to continue to do warranty work for several years after Saturn was gone.

Thanks for the update.

While I can understand why some dealers feel they can complete a buy/sell without any assistance I think Hyundai of Lansing is a great example of a situation where a competent broker would have been able to find a buyer and keep the dealership viable.

When I review the completed transactions that Moshe from Performance Brokerage Services posts on the forum I'm often amazed that the vast majority of the transactions are between two dealer principals who never knew one another and often come from completely different markets.

Originally Posted by keydiesel

They were pretty busy when they were a Saturn dealer and had a decent reputation so they never advertised much, she ran the Hyundai dealership the same as she did when it was Saturn and it just didn't work.

That's a great observation.

I saw something similar happen to a Jeep dealer who moved from a location in a metro market where he had frontage on the main highway who then sold out and filled a CJDR open point in a rural market. A business strategy that was successful for a metro market with lots of drive by traffic didn't necessarily work well for a rural location. It was a great example of "adapt or die."

Back to Hyundai of Lansing - is the facility still vacant?

[keydiesel]

I don't know what is going on with it, I believe she lost the building in the bankruptcy, there has been some activity with it lately and I heard that a used car dealer was going in there.