The Rise of South Korea

Editorial

It wasn't so long ago that Hyundai seemed to be nothing more than standard transportation that lacked any sort of emotional or technical qualifications for most American car buyers. Hyundai was aware of this and even considered pulling out of the US market entirely. This was in the mid to late 90s when, if you recall, the economy was good, unemployment was at a record low, and the Detroit Big Three were rapidly selling trucks and SUVs.

Oh yeah, gas was also dirt cheap (less than $1.00/gallon in many parts of the country). Hyundai made a decision and began to undertake the unthinkable. They ferociously analyzed and picked apart both their American and Japanese competition, with more focus on the latter. What made a Toyota a Toyota? What was it exactly that brought in millions of customers to their dealerships? The answer(s) were evidently clear: Americans wanted safe and reliable transportation, even if it meant that some performance and styling would be sacrificed.

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Americans also love a bargain. While they were often willing to pay a small premium for long-term reliability, the extra price would only go so far. With this intense schooling, Hyundai figured out exactly what they had to do. It began with something simple: stand by your products. They introduced their 10 year/100,000 mile warranty program for every model. Hyundai also infused themselves with the motto that NASA couldn't follow: faster, better, cheaper. Thus began their policy of consistently making cars that offered similar (if not improved) features to their competitors, all for a better price.

Hyundai and sister company Kia were both building solid cars in terms of reliability, build quality, and fuel mileage. Their customer retention rates climbed and new buyers came. The only thing missing was attractive design. They then began to hire top designers away from the leading auto companies, such as GM and Audi. With the "guts" already in place, all Hyundai needed to do was let their new designers get to work and continue their successful engineering and manufacturing operations. And then the perfect storm hit: the Great Recession.

Unlike almost every automaker, Hyundai/Kia was now in a position to strike their competitors where it hurt them most: sales. Hyundai is now building cars that are equal to their Japanese, American, and even German competition. German? Volkswagen CEO Martin Winterkorn has expressed his respect and admiration of Hyundai's ability to transform in a little over a decade into a true competitor. Hyundai is now the world's fifth largest automaker and operates the world's largest integrated automobile manufacturing facility that's capable of producing 1.6 million units annually.

They employ about 75,000 people (31,000 in the US), sell cars in 193 countries, and have around 6,000 dealerships worldwide. They also listen to their customers. Hyundai North American CEO John Krafcik made a now famous keynote address at the 2009 Chicago Auto Show where he stated that "our cars should be gorgeous...we should focus on quality, not meeting cost targets." Along with proposing for the industry to adopt guidelines for executive compensation, he spoke about not just meeting government regulations, but to exceed them.

He declared that "we need to stand on our own two feet. We can't rely on governments to direct our business for us, nor would we want to." Krafcik is holding his company and the industry as a whole to higher standards. They're now at the top of consumer lists for overall quality, satisfaction, and value. Argue all you want and everyone is entitled to their opinion, but the numbers speak for themselves. South Korea is officially a big time player in the global auto business. Even if you're still laughing, Detroit, Toyota, Honda, and VW, certainly aren't.

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