Hyundai Breaks Out of Its Past



 2006 Hyundai Azera by TCC Team (6/4/2006)
Movin’ on up.

Spy Shots: ’08 Hyundai Equus by Hans Lehmann/Hidden Image (5/8/2006)
A luxury car for the world?

Spy Shots: 2008 Hyundai Mesa by Brenda Priddy (5/15/2006)
South Korea's biggest yet.

 It was the butt of bad jokes, a brand only the most desperate motorists could take seriously, and little more than a decade ago, with sales in a nosedive, Hyundai seemed likely to vanish into the dustbin of automotive history. Yet anyone wagering against the Korean carmaker would’ve lost the bet, it turns out.


Since 1998, Hyundai Motor America (HMA) has seen its sales soar more than four-fold, and after reaching a record 455,012 last year, the company is confidently forecasting the numbers will top the half-million mark this year, despite the overall slowdown of the U.S. automotive market.


Of course, Hyundai made bold predictions before, and its initial success was followed by a near-fatal collapse. This time, though, company officials insist they’ve learned from the past — and from their competition. They’re emphasizing quality and reliability, putting a premium on safety, and fast filling in the gaps in the brand’s product portfolio. But perhaps the boldest — and riskiest — move is the opening of a new Alabama assembly plant, a facility expected to supply the bulk of the vehicles Hyundai will market in North America.


To get a sense of what’s in store, we spent an evening with John Krafcik, HMA’s vice president of product development and strategic planning. Krafcik joined Hyundai two years ago, after spending much of his career with Ford Motor Co. and, before that, NUMMI, the California-based joint venture between Toyota and General Motors.


Krafcik recalled it wasn’t an easy decision to move, but he ultimately decided to go with a “growth-optimistic company, rather than one that was trying to manage its decline.”


Part of the appeal, he added, was “the freshest lineup in the industry,” Hyundai’s 24/7 plan was aimed at rolling out seven all-new or completely-updated model lines in just 24 months. Indeed, today, Krafcik pointed out, “The oldest car in our lineup is the Tucson , which will be two years old in December.”


The big push is wrapping up, with the recent update of the Sonata, the introductions of a Santa Fe replacement, the launch of the near-luxury Azera and the addition of Hyundai’s first minivan, the Entourage. Hyundai will have eight models in its lineup, but there’s more to come, Krafchik hinted.


With the Santa Fe moving up-market, there’s room for another crossover/SUV below it. But Krafcik said the upcoming offering, which will reach showrooms during the first quarter of 2007, will not carry the Mesa name previously reported.


Another product in the works is the “Rear-Wheel-Drive Premium Car.” While there’s some debate whether to bring it to the U.S. , the vehicle would be positioned above the Azera, nudging into Nissan Maxima, even low-end Lexus territory.


Like many of competitors, Hyundai is looking to rear-drive for several models, perhaps tapping the RWD expertise of its sibling brand, Kia. That approach could help Hyundai finally achieve the promise of its sporty Tiburon. The prototype under development, boasted Krafcik, “is oozing performance. Imagine an Infiniti G; this is where it will go.”


Meanwhile, a Tiburon convertible is under serious consideration.


While new product is clearly critical to Hyundai’s present and future, there are other issues it must address. Hyundai is hoping to steal a march on the competition by offering anti-lock brakes, traction, and stability control in the majority of its new models.


A ten-year warranty was critical to Hyundai’s turnaround, acknowledging longstanding quality problems and customer dissatisfaction. It generated plenty of press, but also risked running up billions of dollars in additional repair work. As it turns out, asserts Krafcik, the “ America ’s Best Warranty” program was a sound, economic bet.


“Our warranty costs are falling off the chart,” he said, currently running “30 to 40 percent” what they were when the program began and half as much as in 2002.


That’s more impressive given the flood of new products, which have been launching without many of the expected launch problems. There were some initial start-up issues in Alabama , but Hyundai trimmed line speed to focus on quality concerns — or so it claims. The test will come, later this month, when J.D. Power & Associates releases its closely-watched Initial Quality Survey.


Other recent industry studies have been favorable, including AutoPacific’s Vehicle Satisfaction Award, where Hyundai was barely nudged out as Best Mainstream Brand by Honda. Hyundai still took two segment awards with its Santa Fe and Azera.


The driving goal is to exceed Toyota , long the benchmark of quality and productivity. While the Korean brand isn’t quite there yet, its rival is facing a rash of problems lately that could hurt its image, even as Hyundai rebuilds its own.


Various industry studies show that less than one in four American new car buyers would consider a Hyundai. That’s echoed by Hyundai’s own data, though Krafcik pointed to a steady rise in the number of current and potential Toyota and Honda owners shopping the Korean maker’s stores.


Meanwhile, transaction prices — the dollars actually paid for a vehicle — have steadily gone up. When the ten-year warranty began, the typical Hyundai went for about 82 percent of industry average. That’s now up to 92 percent.


Though things are starting to look good for Hyundai Motor America, there are still plenty of challenges. The competition is certainly paying more attention to the Korean upstart, with Japanese makers rolling out lower-cost offerings, such as the new Toyota Yaris, Nissan Versa, and Honda Fit.


Initial start-up snags at the Alabama plant showed that not everything goes according to plan. And with that factory soon expected to produce 60 percent of the vehicles sold in the U.S., Hyundai needs to compensate for Korea ’s lower wages. There’s also the indictment of the global parent’s CEO by South Korean authorities in an alleged bribe scheme.


But for the moment, there’s plenty to be optimistic about, insisted Krafcik, and it appears a hard point to argue against.


The Car Connection Daily Headlines
I agree to receive emails from the site. I can withdraw my consent at any time by unsubscribing.
Thank you! Please check your email for confirmation.