Chung taking Hyundai Motor Group global

Established in Russelsheim, Germany a decade ago, the Hyundai-Kia European R&D Center ensures all of Hyundai Group's vehicles meet exacting needs of European roads and consumer desires and handling preferences. The center develops its own powertrains, in some cases arguably equal to those of the best European competitors. The center houses European design studios for both of the brands. Both the engineering center and design centers function in real time with their Hyundai-Kia counterparts in Namyang, Korea, as well as with centers in Japan and the United States.

By Vince Courtenay

Chung Mong-koo
Hyundai Motor Chairman

If you think about it, it took great deal of boldness to try to sell cars in major world markets that were made in a little known country called Korea, with a brand name most of the world didn't know how to pronounce.

Before Chung Mong-koo had been given complete control of Hyundai Motor in 1999, the company already was producing vehicles abroad. Hyundai had an ill-fated plant in Bromont, Quebec, Canada that produced the low quality, extremely low cost Pony and early Excel models.

It operated from 1989 to 1994. It closed when low product quality slashed demand for its products, no matter how cheap they were.

A 50/50 joint venture plant in Turkey launched production in 1997 and the India operations came on line in 1998.

It might be alright to crank out cheap cars of ho hum quality in Turkey and India, but not for more affluent, sophisticated markets like North America and Europe.

Thus, some vehicles from the early overseas plants gave the Hyundai brand a very black eye, an image of cheapness and shoddy workmanship.

Chung knew this and bit the bullet. He bore down hard on every one of his key men, all of his lieutenants, every Hyundai worker. He wanted quality, quality, quality – or the company would never succeed.

The switch to world class quality under his strong hand began in his Ford Rouge-type integrated complex in Ulsan, Korea, which is the largest automotive complex in the world.

As quality rose rapidly, export sales did, too, despite the brand's lingering low image.

The world began to know that Hyundai vehicles, very low in cost, also held up as well as competing brands, although the economy "low class" image remained.

The shipping port at Ulsan was soon virtually clogged with outgoing shipments of the full range of Hyundai cars, being marketed in more than 150 different countries.

And when Chung felt certain that his plants in Korea could match quality of any competitors in the world, he did something very dramatic. He would place similar high technology, high quality, high output plants in some key overseas markets – in the face of the major competitors right where they lived.

The strategy was complex, and well thought out. It was apparent that, operating on a global basis, one market might be up and in high demand, while others might be slumping. It was also apparent that while some Hyundai or Kia cars were the cat's dinner in some markets, they weren't so appealing in others.

One region where demand was high could balance out another where there was a slump. The Hyundai Motor Group collectively could muster its global revenue clout and shift it to reinforce opportunities, or fight off market downturns and other obstacles.

Chung struck at the heart of the world's automotive industry. In 2002 he announced that Hyundai Motor would build a major, industry-leading plant in Montgomery, Alabama, to serve the North American markets. It launched production in 2005, and its top-quality Sonata midsize and Elantra compact sedans have kept it running beyond capacity ever since.

Chung's team put a Kia plant in at West Point, Georgia, which launched production in 2009, producing Kia's Sorento mid-size SUV. It soon added the Kia Optima mid-size sedan, which is built off the same platform as the Hyundai Sonata and Hyundai Santa Fe SUV. The plant also produces the Santa Fe for Hyundai. Like the Hyundai plant in Alabama, it's running full blast on three shifts and produces far above its 300,000 vehicle design capacity.

At present, both plants are strapped for capacity. That is hurting sales growth in the U.S. But the production handicap will be overcome when a new 300,000 car Kia plant goes on line in Mexico in 2016, and begins shipping both Hyundai and Kia vehicles to the American and Canadian markets.

Chung's team also made dramatic moves into China in 2002. Only foreign companies that link up with home-grown Chinese automakers are permitted to operate there.

Hyundai partnered with Beijing Automotive Industry Holding Co. and launched production in a technology renovated plant in Beijing, with initial capacity design of just 50,000 vehicles.

Kia partnered with Dongfeng Motor and Jiangsu Yueda Group in a three-way hookup, and built a similar plant in the 9 million population city of Yancheng in northeastern China.

Chinese consumers like lots of boldness and glitz in their cars, and they like comfort.

Affluent buyers or users of upscale vehicles don't drive them; they are driven – and they ride in the back seats. So the premium and near premium cars must have elaborate, highly comfortable rear seating arrangements.

So both Kia and Hyundai began producing China specific vehicles, and struck gold.

Today, China is bringing home the bacon, offsetting the slack vehicle markets in Korea, Europe and elsewhere. The six Chinese plants of Hyundai and Kia are busting at the seams. Each one is running far above is 300,000 vehicle design capacity. Together they are producing well over one million vehicles a year – and the planned target is to get to two million.

Both Hyundai and Kia have new fourth plants on the drawing board and are hopeful of getting them quickly into production.

Since 1994 Hyundai Group had operated a key Hyundai-Kia engineering center in Frankfurt, Germany, and the center provided data to help tailor product to the European markets.

In Europe, where Alpine grades prevail, drivers like to feel the road they're on. They want vehicles that are gutsy and highly responsive, and they're inclined not to like soft riding cars. They like to know the reins are in their own hands.

In 2004, under the new Chung strategic directives, Hyundai's European headquarters were transferred to Russelsheim, where a new Hyundai-Kia R&D and design center was opened.

With this excellent technical support to draw from, Chung opened the Group's first European plant in 2007. It was a Kia plant, located in Zilina, Slovakia. It began producing the Group's first true European-styled and European-handling car, the Kia Cee'd.

The Group's Hyundai plant in Nosovice in the Czech Republic went into operation in 2008. Like the Kia plant, it was built on the 300,000 per year production template of all new Hyundai-Kia plants. It branded its European cars in the European style; the i30, ix20, ix35.

Hyundai followed this European conquest by putting a plant into Saint-Petersburg, Russia in 2011. It now has capacity for producing 200,000 vehicles annually. In 2012 and 2013 the Hyundai Accent small car it produces was named the Russian Car of the Year.

In 2012, Hyundai opened a new plant in Brazil and since has increased production capacity to close to 200,000 vehicles. It produces the Brazil/Latin America specific line of HB-20 compact size vehicles.

The rudimentary plant in India has since become two, both arguably leading the Indian industry in quality and technology. Hyundai has also established India as its global export hub for compact vehicles.

Though it began humbly and modestly, Hyundai Motor India now holds the nation's second largest sales position in India and the top sales position for exported vehicles.

The plant in Turkey is now world class and produces quality vehicles equal in every aspect to Hyundai products made in any other nation. It has just expanded to 200,000 in annual volume and produces the Hyundai i10 and i20 for sale regionally, and in Europe and other markets.

Chung set out in 2000 to develop the fifth largest automotive company in the world, with a 2010 target for achieving it. The Group moved up from 11th place in 2000 to fifth place in 2008 – two years ahead of the goal.

Both the Hyundai and Kia brands command consumer respect now in all world markets. And the world now knows how to pronounce "Hyundai" correctly.

Vince Courtenay has been the Korea correspondent for WardsAuto.com and Wards AutoWorld for many years. He is a Canadian Korean-War veteran and a nonpaid consultant to Korea's Ministry of Patriots and Veterans Affairs. He was awarded Korea's Order of Civic Merit earlier this year by President Park Geun-hye.