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Management Q & A

The pieces are in place as Hyundai takes the next step toward becoming a top-five tier one manufacturer.

Hyundai’s CEO, Finbarr O’Neill sees sales, and quality, on the rise.
Five years ago, fledgling Hyundai Motor Co. was facing a huge sales slump and competitors painted a dismal future for the brand in North America. The plucky Korean manufacturer fought back with a bold 10-year, 100,000 mile powertrain warranty and backed it up by building seemingly good quality, inexpensive vehicles. Sales have risen 317 percent since 1998, and Hyundai has seen its brand loyalty rise from 17 percent in 1998 to 47 percent today. With a new design and technology center just opened, a new California proving grounds under construction and the imminent opening of its first U. S. manufacturing plant next year in Montgomery, Alabama, Hyundai is setting the stage to become a tier one franchise. Automotive Industries talked with Finbarr O’Neill, president and chief executive officer and got his insights on how Hyundai managed to find its way onto so many American’s shopping lists and how it plans to stay there.

Q. When you launched Hyundai’s 10- year, 100,000-mile warranty in 1998, detractors in the industry said it would come back to bite you. What do you have to say to them now?
I think that it has been a successful step for us. We’ve put our money where our mouth is. It’s a tangible statement in our confidence of the quality of the products. But customers don’t buy warranties, they buy cars. The warranty can get you on the shopping list, but the car must sell itself. I think it’s been successful from the point of view of getting Hyundai on the shopping list. We feel that it was a good decision and we hope nobody else tries it.

Q. What is it that draws people to Hyundai?
A. I think it continues to be based on the superior value of the product. And value is a word that includes not just price, but the content, the quality and the peace of mind that people get. Word of mouth is starting to spread about Hyundai. People are coming to recognize that it’s a product worth looking at and when we get on the shopping list, we get our share of sales.

Q. What has Hyundai done to keep quality up as volumes increase?
A. We see quality as an ever-moving goal post. There’s no doubt that the cars of today are better than the cars of three years ago, never mind 10 years ago. With that continued competitive pressure, and given the position from which we came, we realize that we have a steeper hill to climb. The watchword from Korea is that quality is the critical element to building our brand. Because, if we can achieve quality, sooner or later we’ll see that we’re generally accepted in the market as a brand of choice.

Q. What has been done in the Korean plants to improve quality and focus vehicles to the North American market?
I think the most important thing that the company has done is listen to the consumer — not just in things that have gone wrong, but also in refinements. We set up systems to make sure that gets fed back and gets integrated, not just into the design process, but into the assembly process, so that we’re constantly improving. Our plants are world class. It’s not just a question of high automation, because automation in and of itself is not the end of things. But it is a commitment to quality. Chairman M.K. Chung hammers the issue of quality. It’s innate quality that’s pushed up the chain to the suppliers and down the chain through us to our dealers.

Q. Hyundai recently opened a new design center and broke ground for new proving grounds in California.   How will these facilities help in designing and building better vehicles?
It reflects a commitment to design and build products that meet the expectations of North American consumers. Hyundai has 23 platforms and we want to consolidate to about seven, and off those seven platforms feed two brands, Kia and Hyundai. You might say to yourself, ‘Well, that could result in “world cars”,’ but I think the company really understands that you have to design products that meet the needs of consumers in those markets and stand out among the competition in those markets. The only way to do this is to have design input for the products from those markets. Durability is a big issue in this market, because a key characteristic of the strong brands is a very strong reliability and durability reputation with consumers, so that’s where the testing comes in.

Q. Are there plans to market the combined strengths of Hyundai and Kia, marketing them together like Cadillac/ Chevrolet or Lexus/Toyota?
A. No. The Kia and Hyundai brand differentiation is being worked out product by product. There are no plans to have them as vertically related brands, that is as luxury and non-luxury. We will keep them both as nonluxury brands with different images.

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