Hyundai, Kia stand for best in automaking
By Kim Da-ye
Hyundai Motor Group is blossoming.
Korea’s largest automaker launched seven new models here in the last 15 months and gave facelifts to 24. Many of them became instant hits including the fifth-generation Grandeur and the K5 sedans.
Numbers prove the firm’s success. Hyundai Motor recorded 36.8 trillion won in revenue in 2010 and 3.2 trillion won in operating profit ― up 28 and 44 percent respectively from a year ago. Kia Motors made 23.3 trillion won in revenue and 1.7 trillion won in operating profit ― up 26 and 47 percent.
Both carmakers had exports counting for more than 60 percent of their sales. Hyundai Motor sold more than 500,000 vehicles in the U.S. for the first time last year while the sales of both Hyundai and Kia breached 1 million in China where they now have the second largest market share at nine percent after Volkswagen Group. Kia celebrated the export of its 10 millionth vehicle last Thursday, which was a K5 sedan.
Investors are drooling over their stocks. Hyundai’s rose from 117,000 won on March 29 last year to 207,000 won on the same date this year while Kia’s havenearly tripled from 25,850 won to 68,700 won.
What happened to Hyundai-Kia?
Quality
American market research firm J.D. Power and Associates showed March 17 Hyundai Motor has significantly reduced problems per 100 three-year-old vehicles to 132 and finished 10th overall ahead of luxury automakers such as BMW who had 164, Audi with 161 and Infiniti with 151. It was ranked third among non-premium firms after Toyota and Buick, according to the Vehicle Dependability Study.
The automaker gives credit to Chairman Chung Mong-koo’s near-obsession with quality control for the improved quality of its vehicles.
“As well as checking problems of vehicles in the market, the chairman feels and looks into cars under development and directs what needs to improve. Because of his belief in quality, production often came to a halt and the launch of a new model has to be delayed,” a Hyundai official said via email.
The company says Chung frequently visits the foreign branches to check their production and quality control.
He integrated the production, sales and after-sales service departments into one comprehensive quality control center, and chairs its monthly meeting.
Hyundai’s improved quality was noticed by the foreign press. American weekly, Automotive News, chose Chung as this year’s best chief executive officer in Asia.
“Chung, 72, turned the Hyundai brand into a superpower, boosting global sales and share in defiance of a torturous world economy that had rivals floundering,” said the publication. “The Korean boss pushed his company into new segments, built on steady and dramatic improvements in quality and handed U.S. executives more autonomy.”
The world’s fifth largest automaker is now pushing to take advantage of the gap in the market left by recall-struck Toyota.
The newly released vehicles of Hyundai and Kia have at least six airbags including those for the sides of the backseat as standard features.
It has also replaced the conventional gas pedal with a foot-length “organ-type” pedal which won’t get stuck under the floor mat. A Hyundai official said the firm learned important lessons from the massive, worldwide recall by Toyota after some gas pedals were seen trapped under floor mats with the car continuing to accelerate.
Globalization
The group’s main strategy in expanding into overseas markets is localization ― building auto plants in the targeted markets and producing cars suiting local consumers’ needs.
A decade ago, Hyundai-Kia had assembly lines in India, Turkey and China. It now has production facilities in nine countries including the U.S., Russia, Czech Republic and Slovakia. In February Hyundai broke ground on a 150,000 vehicle-a-year plant in Brazil.
Hyundai-Kia’s global sales grew from 2.46 million automobiles in 2001 to 5.75 million last year. The firm says that both domestic and foreign factories will be able to produce 6.58 million a year in the future when the new Russian plants add 150,000 and the third factory in China and the Brazilian plant are completed, producing 400,000 and 150,000 respectively.
The local factories not only boost the numbers, but also produce vehicles tailored to their markets. In Europe Kia makes the Cee’d and the small Venga hatchbacks. Hyundai’s i20 and i30 have been well-received there while the smaller i10 is popular in India. Hyundai launched a compact sedan in Russia called the Salaris.
The company says that it was Chung’s idea to branch out into Europe where European auto brands known for high quality dominate the market.
In 2007, Kia officially opened its Slovakian plant and Hyundai started building another in the Czech Republic. Chung reasoned that producing cars in Europe will help the company quickly react to the needs of the market and raise brand awareness among European customers.
Going large
Hyundai Motor Group is one of a few automakers whose affiliates cover nearly every sector involved in auto production.
It has an auto-financing unit in Hyundai Capital; a logistics arm, Glovis; a factory builder, Hyundai Amco; an engine maker, Hyundai Wia and even an advertising agency in Innotion Worldwide.
Hyundai Motor itself has created impressive car parts including the 5.0 Tau V8 engine that delivers 429 horsepower and was named in Ward’s 10 Best Engines in the U.S., an annual list of best automobile engines.
One of the most prominent affiliates is Hyundai Steel whose hot rolled steel is used in vehicle production.
The steelmaker’s integrated steel mill in Dangjin, South Chungcheong Province, began operations at its second blast furnace last November with the production capacity expanding to 20 million tons. Hyundai Steel says it became one of the top 10 steel makers globally.
Hyundai says it was Chung Mong-koo’s belief for needs of high quality steel products for good cars that led to the acquisition of Hanbo Iron & Steel in 2004 and construction of the integrated steel mill with two blast furnaces.
Another is Hyundai Mobis, which Mirae Asset Analyst Kim Yoon-ki says, is the only car-part supplier wholly in charge of supplying parts for after-sales service.
Because Hyundai-Kia’s sales grew so much in the last three years, Kim says Mobis’ earnings for the next three years would be stable.
Hyundai Motor Group signed a deal this year to buy a 34 percent stake in Hyundai Engineering & Construction (HE&C), the nation’s biggest builder in terms of construction capability.
The automaker says that its future portfolio will be based on synergy among autonobiles, steel, and construction. It hopes to develop HE&C from a construction company into a “comprehensive, high-value-added” engineering company that builds renewable energy plants, housing and maritime facilities.
The group vowed it would invest 10 trillion won in the builder as well as boost its work force from the current 90,000 to 410,000 in 2020.
Untrodden path
While Hyundai has been working on improving quality, going global and consolidating for over a decade, it recently began exploring the areas it wasn’t much familiar with ― design and eco-friendly vehicles.
The sleek fluidic sculpture design of the Sonata YF sedans is immensely popular in the U.S., and the automaker began applying it to its entire fleet in order to give them an identity.
The experimental design became even bolder with the launch of Veloster, a coupe with two doors on the passenger’s side and one on the driver’s.
Kia Motors’ advance in design was particularly well-received with its K5 sedan and Sportage R utility vehicle winning March 15 honors at the red dot award: design concept 2011 in Germany.
Kia began improving its vehicle design by encompassing unity when Peter Schreyer, well known for his design of the Audi II, was hired in 2006.
Hyundai won’t want to be left behind in the eco-friendly vehicle sector.
Having unveiled its all-electric vehicle BlueOn last year, it aims to commercialize vehicles operating on hydrogen fuel cells soon.
The Tucson ix Fuel Cell Electric Vehicle (FCEV) has been unveiled at a few motor shows, and Hyundai said it will test about 50 of them in 2011 under the government’s validation program. It plans a limited supply of the vehicle in 2012 and mass production in 2015.