Richards, Carat Lose Big as Hyundai Disbands Dealer Groups

$300 Million in Billings Gone but Agencies Retain National Account

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DETROIT ( -- Richards Group and Carat North America are out $300 million in billings, as Hyundai Motor America has disbanded its five regional dealer groups.
Steven Wilhite has disolved Hyundai's five regional groups and is allowing dealers to form smaller ad groups.
Steven Wilhite has disolved Hyundai's five regional groups and is allowing dealers to form smaller ad groups. Credit: Nissan Motor Co., Ltd.

Pitch the dealers
Dallas-based independent Richards Group, which held the regional dealers' creative business, and Carat, which handled media buying, retain both those duties on a national basis for the South Korean automaker. They can, if invited by dealers, pitch for accounts from a slew of smaller regional dealer ad groups that are cropping up now that Chief Operating Officer Steve Wilhite has dissolved the larger ones.

Under his new system, Mr. Wilhite is allowing Hyundai's 752 U.S. dealers to form smaller ad groups, which he believes could tally 90 by year's end. Having multiple agencies could spell disaster, some dealers and experts said, because it could result in widely varying ad messages that could hurt the brand. Since Richards won the account in 2002, Hyundai had instructed the agency on the look of regional dealer ads, which very much resembled the national work.

Richards shuttered all five of its regional offices that had serviced the dealers and laid off about 20 people, Stan Richards, principal and founder of Richards Group, said. "We're sorry to see that work go away, but we'll salvage as much of it as we can."

National campaign from Siltanen
Meanwhile, a Hyundai spokesman confirmed the automaker has handed a national project to Siltanen & Partners, Marina del Rey, Calif., though the spokesman said he did not know the details.

Rob Siltanen, the agency's founder, said his shop is in the process of creating a full national campaign for a whole range of products, with more than two TV spots and print being worked up.

The change comes as Hyundai aims to keep boosting U.S. sales and readies the spring launch of the all-new 2007 Veracruz crossover. The automaker reported its eighth consecutive year-over-year sales jump, selling 455,520 vehicles in the U.S. in 2006, a slight bump from 2005. But the 2006 tally was still short of Hyundai's goal of 500,000 units, partly due to a month-long factory strike in South Korea. Hyundai's 2007 goal is to sell 550,000 new vehicles, Mr. Wilhite told dealers last fall.

Hyundai is losing its momentum, said a veteran dealer who asked not to be named. He said showroom traffic this month has slowed to a trickle and sales are half what they should be. He questioned the wisdom of dissolving the dealer ad groups, asking, "Why would you dismantle a juggernaut that got you to 400,000-plus cars in 2006?"

Showroom traffic is 'way off'
January is traditionally the industry's slowest month, but traffic has been "way off" and slower than usual for Hyundai dealers in Maine, Massachusetts and New Hampshire, said Tom O'Brien, a dealer outside Boston.

A Hyundai spokesman said car sales in the first two weeks of January are historically slow for the industry after the flurry of year-end sales, and that Hyundai's monthly sales to date "certainly are not significantly lower than our estimates." He said the overall U.S. industry's sales are down for the month, but "probably not huge," and that Hyundai "is optimistic" it will meet its goals in January.

Hyundai's largest region in terms of sales volumes -- the Northeast, which covers New York, Connecticut, New England, Philadelphia and as far west as Pittsburgh -- is reforming its dealer group and expects to start an immediate search for creative and media buying, Mr. O'Brien said. He said Richards will be considered, as will most likely Hill, Holliday, Connors, Cosmopulos, Boston, and undetermined shops in New York and Philadelphia.

Scott Fink, a Florida dealer and member of the dealer council, said he and other Tampa-area retailers are forming a new smaller group and will invite Richards to pitch. But he said the group may want a full-service shop that can also buy media.
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