Gojirra99

Automotive News / February 13, 2006 - 6:00 am

Infiniti's popularity soared during the early part of this decade with hot new additions such as the G35 coupe and sedan, the FX 35/45 crossovers and the full-sized QX56 SUV.

Dealers reported record profits in 2003 and 2004, and the marque recorded more than 100,000 sales in this country for the first time in 2003. That year dealers sold 118,655 units. That number increased to 136,401 sales in 2005.

But amid higher inventory and a dearth of new product lately, dealer profitability has begun to wane.

Ed Lennon, a New Jersey dealer and chairman of the Infiniti Dealer Advisory Board, tells Staff Reporter Kathy Jackson that Infiniti dealers still are happy. But he asks: "Where is the new product?"

1) What's the situation with the important issue of return on sales?

We had dramatic growth in '03 and '04 and the highest profitability we had ever seen as a percent of sales. It was over 3 percent in '03 and '04, but we finished '05 under 3 percent. Our goal is to be at 4 percent. A Tier 1 luxury brand should have at least a 4 percent return on sales.

2) What happened last year to cause the return on sales to slip?

We had good sales, but our inventory grew. As inventory grows, gross profit drops.

3) Why did the inventory grow?

There's nothing wrong with our product; our product is great. But what our customers want to see is change. The only new product we had in '05 was the M. The G35 and the FX have been out for a few years.

When the product is new, that is the best opportunity for profitability. That is when people are willing to pay.

4) What new product is in the hopper?

The G35 came out in the middle of '02. We will get a complete upgrade of the G sedan this fall as an '07 model. But after the G35 - what's after that?

We don't know.

They say over the next three years new product will come to market, but they keep it very close. That frustrates us. The dealers want to know.

5) Has Infiniti been too slow bringing fresh new product to market?

I don't think anyone was sure how successful we would be with new product like the G35 and the FX. Now, I think everyone from (CEO) Carlos Ghosn to Jed Connelly (head of Nissan in the United States) is surprised how well we did do with it. Still, the cycle has been a little longer than dealers would like it to be.

There has been a lot of talk about whether the GTR sports car will be a Nissan or Infiniti when it goes on sale in this country. Have the Infiniti dealers been told anything about this?

They're keeping the product plans for the next three to five years very close, but Nissan North America has asked Nissan Motor Co. to make it an Infiniti. That's what they've told the dealer body. The dealer body is encouraged. It will be a low-volume car at about $50,000 or over. That is better suited to be an Infiniti than a Nissan.

6) Does Infiniti need a smaller sport wagon than the FX?

That's an area they're looking at and where we need to be. That's an area where we're not competing. The FX is more male oriented and not hitting a big part of the market.

7) What other holes are in the lineup?

We need a coupe with a retractable hardtop. We believe we need a halo car to solidify us as a luxury marque.

8) The GTR would not be a halo vehicle?

The GTR is pure muscle. A retractable coupe under $50,000 would appeal to many people.

9) Overall, are the dealers happy?

We saw our most profitable years ever in '03 and '04. Average profits per store were over $1 million. '05 was down a little bit, to about $800,000 to $1 million on average, but still a very good year. We have a very open forum with the factory right now.

The product is the only thing they're holding close. The dealers are happy, but we could do better if we had more product.

10) Infiniti stores are taking on a new look. How do the dealers feel about that?

For any businessman to buy into that, we have to feel good about the future. I think the dealer body is more than willing to do the retrofits because they believe we will be successful.

11) Do you think Infinitis are priced right?

Until we reach the top, we will have to be the value story. If anything, I'm concerned about price increases for the brand. We have to be the value franchise until we can say we're a Tier 1. We have not reached our goal until we can charge more.

12) Which brands do you consider to be Tier 1?

Mercedes, BMW and Lexus. We would like people to throw us in there as No. 4.

13) Are you satisfied with Infiniti marketing and advertising?

Since Jan Thompson (vice president of marketing) came on board in mid-2004, I've been very impressed. She knows what Tier 1 is.

We're starting to spend the money we need to spend so Tier 1 buyers can see us.

14) What are you doing to reach those Tier 1 buyers?

Three years ago we weren't spending enough money in any area. In '05, we did well with network TV. Moving forward, we will focus on the Internet

flipside909

No Comment.

jrock65

Since Infiniti made the decision not to make FWD sedans or FWD biased SUVs, they are never going to get volume like Lexus or Acura.

The Accord-based TL and Pilot-based MDX account for 65% of Acura sales.

The Camry-based ES and the Highlander-based RX account for 58% of Lexus sales.

Infiniti has no Altima based sedan or a Murano-based SUV. And I think they pretty much said they aren't going to make either one.

What they really need is a successful flagship sedan. Otherwise, they will never be considered a Tier 1 brand.

Iceman

There are some interesting conflicts in this guy's thoughts. This guy of course represents dealers, and so his perspective is skewed, but like jrock65 said, sometimes getting short-term profits (which he hammers home near the beginning of the interview) is inconsisten with building the long-term health of the brand (which he obsesses about near the end).

Also, I don't know how a retractable hard-top coupe for under $50K would serve as a "halo car" for Infiniti. Actually, the whole interview comes across like somebody desperate to be something they're not. Like the guy selling hot dogs in Manhattan who looks up at the big financial buildings and thinks he should be working there like the suits, but it just ain't ever gonna happen.

Och

iTrader: (3)

Yeah, a lot of this hot dogs guys make way more than the suits.

LexFather

12) Which brands do you consider to be Tier 1?

Mercedes, BMW and Lexus. We would like people to throw us in there as No. 4.

AND I REST MY CASE FOREVER!!!!
Lexus/BMW/Benz= Nathans all beef gourmet hotdogs
Infiniti=99 cents red links

LexFather

Nissan never stated ANYWHERE, they are going to be RWD based only. The G20 and I30/35 sold poorly. Period. If either sold well and the public was receptive to it, they would CONTINUE to make them.

Benz/BMW don't have FWD cars and they sell very well. Its the product.

flipside909

I was thinking more along the lines of Libby's Vienna Sausage.

jrock65

Back about 3 years ago when the decided to scrap the I30/35, Infiniti stated that they are going RWD or AWD only. It was part of their brand makeover to market itself as the Japanese "BMW" with emphasis on sport. Of course, they could change their mind any time.


Regarding the I30/35. It never sold as well as the ES or the TL, but it had okay sales and was the best selling Infiniti. In fact, without the I30/35, Infiniti would have been scrapped from the U.S. during the late 90's. The main reason for discontinuing it is the image makeover to distance themselves away from FWD products.

I agree it is the product. MB/BMW don't need FWD because their brand marque is so strong and they have a lot of product variations. Infiniti has neither.

WhiteTiger

Oh boy, all these hotdog comments, sounds like you guys might be working both sides of the fence...LOL!

Regardless of where the brand is I'll still take the M45 over the GS430 all day long. (and so did many of the reputable car review magazines out there too. ) Not saying the GS is a bad car, it just isn't an M45.

INHOCJP

Them fighting words! J/k, I like the M45 also, and while it may have a peformance edge on the GS, the GS has the luxury edge over the M. However, with the upcoming GS460 though, the performance edge of the M may become a thing of the past.

What Infiniti really needs is a flagship vehicle to carry showcase the brand. When the latest redesigned Q came out, some people were predicting it would outsell the LS. The Q has been a sales flop. If Infiniti is going to be considered a "Tier 1" brand, it needs a model to compete with the S Class, 7 Series, and the LS.

LexFather

We are not talking one car vs the other. We are talking about a Tier 1 brand vs a Tier 2 brand, which is almost apples to oranges.

Jrock, I need to see a press release. What you are saying makes sense technically, since they do not offer a FWD product but I never saw anything where Nissan officals made that statement. Its just a common excuse people use to cover the brand up.

I honestly hope they don't go the cheap/volume route and introduce a sub FX SUV.

Time and time again, I have said, in this pond, there is only room for 3 big fishes in America, BMW, Benz, Lexus and everyone else are small fishes. We have too many luxury brands trying to re-invent themselves (Caddy, Infiniti, Acura, Lincoln, Volvo etc) when 3 of them have had it right from the get go. People go to places they can trust.

I do not see another Tier 1 brand in America. And if it is anyone, it would be AUDI.

The lineup it just too inconsistent. The G35 and M35/45, FX35/45 are very solid and competative. The Q45 is a joke. The QX56 is the worst built vehicle right now quality wise.

The GT-R, while we all smile and giggle about, it not a very well known car in America. Kids and people that cannot afford it know and drool over it. Not sure a 65k+ Infiniti, no matter how great the performance, will find a buyer. Just ask Acura and the NSX. It is small volume as well.

Bottom line, they should be happy where they are but honestly, not expect much more. Look at Caddy, a totally revamped lineup, even V series models, and they are still Tier 2.

Gojirra99

Infiniti wouldn't need to drop the I30/I35 even if they wanted to introduce the G35 if the I30/35 were deemed of value to them.

Lexus wanted to introduce a sports sedan with the IS300/IS250/350, but they didn't need to drop the ES since it's selling so well. It would be crazy for any company to drop a car like the ES, FWD or not, until people stop wanting them.

I personally prefer not to have a Camry based FWD Lexus in the Lexus line-up (save them for Toyota), but I know it's not going to happen as long as the ES continue to sell like hotcakes.

jrock65

It wasn't in a press release. Such a statement would usually not be made in a press release. As I remember it, they were statements made by a Nissan exec during an interview or excerpts from a talk to the dealers.

I can't find the link right now (it was from about 3 or 4 years ago).

You gotta remember that the Infiniti brand was on life support before the intro of the G35. Basically, the Nissan exec said that the Infiniti brand had no identity and no direction. People didn't identify Infiniti with sport (a la BMW), luxury (a la Lexus), prestige (a la MB) or safety (a la Volvo). It made a couple of FWD vehicles (G20 and I30) and the QX4. The Q45 didn't sell. No image at all.

So they decided to go the Japanese "BMW" route by offering sporty RWD vehicles. An FWD vehicle would have gone against that image. They wanted people to identify Infiniti with something, in this case sport.

It was a risk in deciding to scrap their best seller (the I30/35), but they felt they had to do it to save the brand. In 2001, the I35 accounted for about 50% of all of Infiniti's sales. To discontinue a vehicle that accounts for such as large percentage of your sales is a big risk however you cut it.

Anyways, I don't remember exactly what he said, but that was the gist of it.

An identity is a hard thing to gain or lose in the lux car business. Lexus makes some nice sporty sedans right now, but the lay public still identifies the Lexus brand as a maker of plush, comfortable, and reliable vehicles.

Personally, I wouldn't mind seeing Infiniti bring back a $35,000 FWD sedan. The ES has virtually no competitors right now. But Infiniti should only do it after a successful flagship sedan.

T0ked

iTrader: (2)

Prestige and notoriety begin from the top down. Infiniti, much like Acura (which was discussed on another thread) needs a flagship model. Not the $100k sports car, but the ***** out, technology tour-de-force, luxury flagship in the veins of the S, 7, and LS. There is a reason both Lexus and Infinti began with 2 full-size sedans in the 1990s. Inifiniti never really improved upon the Q while Lexus nurtured the LS to what it has become today, its successful flagship model sporting the most powerful engines and advanced electronics. Unless Infiniti is able to do something with the Q, they'll continue to wallow as Teir 2 with Acura and Caddy. Is there a Teir 2.5? I'd throw Jaguar and Audi in there. Definitely contenders, but not quite up there with the big three.