Once headed for the industrial junk
heap, Hyundai drove itself back from the brink by learning
three little words: quality, quality,
quality.
J.D. Power III can still vividly recall his eye-opening maiden
visit to a Hyundai plant in
Seoul,
South Korea, back in the
mid-1970s.
"In their plant, they had people digging ditches - in dirt floors,"
recalls Power, the guru of American automotive tastes. The
trenching work was all part of the plant's hurried efforts to
finish construction work. Even without a completed foundation,
though, "they were building vehicles." Not only was the assembly
line operating in jury-rigged disarray, but Hyundai's suppliers
were shipping second-rate parts. And the cars they were turning out
quickly earned a reputation as the very worst the automotive
industry had to offer.
Power's one-word description of the cars they were producing?
"Dangerous."
When they weren't being laughed out of the U.S. market, Hyundai
cars were racking up some of the worst quality ratings Power had
ever seen. And fleets of American consumers predictably avoided the
ugly little vehicles.
Twenty years later, Hyundai was making better cars, but the company
was still dogged by a reputation for shoddy engineering and
mechanical failure. In the minds of consumers, Hyundai was a
fourth-rate player, trailing well behind American muscle, European
style, and Japanese performance.
But after years mired at the back of the automotive pack, Hyundai
started to break out. Starting in the late 1990s, top management
invested huge sums in new technology. Executives hired J.D. Power
and Associates, the marketing firm best known for its car ratings,
to tell the company what it needed to do to shed its broken-down
image and go head-to-head with the Japanese automakers that had won
the admiration of drivers worldwide.
And then Hyundai management pulled a leaf directly out of Lee
Iacocca's old playbook from the time he engineered the Chrysler
turnaround - and did him one better: They offered consumers a
10-year power train warranty. It was twice as long as any other
carmaker's warranty.
They understood perfectly that the big, boisterous U.S. market was
where big money could be made. And the new warranty was a simple
guarantee to that market that Hyundai's new talk about quality was
no joke - even though it came from one of the longest-reigning
clown acts in the auto trade.
"It was no small feat to figure out how to make it right," says
Bruce Bezlowski, assistant research scientist at the University of
Michigan Office for the Study of Automotive Transportation. "To
[Hyundai's] credit, they were able to learn quickly and adjust
quickly. I've seen very few companies turn around as quickly as
they have."
In the space of one year, from 2003 to 2004, Hyundai jumped from
tenth place to second place in J.D. Power's initial quality
surveys. Making that kind of leap requires managers who are willing
to learn and who can be relentless at teaching the rest of the
organization how to improve.
"In the last 20 years, they've gone from dead last to a dead heat
with Toyota," says Steven Szakaly, an economist with the Center for
Automotive Research in
Ann Arbor,
Michigan. "Every single product
life cycle, they've made some improvement. It's an amazing company.
Just the growth and improvement in quality is amazing."
Hyundai's reward: Some of the best press a car manufacturer has
ever seen. Consider the reviews when it introduced the new Sonata,
made in
Alabama. Dan Neil, the Pulitzer prize-winning auto
columnist for the
Los Angeles Times, wrote: "Stravinsky said lesser
artists borrow, great artists steal. Hyundai is turning out to be
the Rembrandt of affordable transportation."
Learning to Listen
There are no dirt floors at Hyundai's shining new manufacturing
facility in Hope Hull, Alabama.
Advanced robotics handle much of the work. From the time steel is
delivered to the plant to the moment it actually reaches the car,
no human hand touches it. Skeletal vehicles slide down a quiet
monorail system that adjusts to each worker's height. Auto bodies
are mechanically dipped and rotated 360 degrees in tanks filled
with a rust-preventive coating, a new process aimed at eliminating
the air pockets - and weak links - that always lingered after older
plants' simpler dump-down, lift-out bathing procedures.
Those are just a few examples of the new technology that gives
Hyundai an extra manufacturing edge. And Power says it's been clear
for almost a decade that Hyundai is prepared to spend extra to
sharpen that edge as it cuts out a bigger market share for
itself.
"I visited [Korea] back in '96, '97, and got a look at their
facilities, and I saw what they were investing in: product
development, test tracks, wind tunnels, state-of-the-art
technology," Power says. "And I knew that was eventually going to
have a big effect on the quality level of the vehicles."
Then came a crucial heart-to-heart meeting in 1998, when Power
outlined a new approach to the company.
"I listed the steps Hyundai needed to take, and I talked about the
voice of the customer," Power says. "They had to listen to what the
customer wanted. And if they monitored the buyers of their
vehicles, we could show them where certain aspects of the vehicle
needed more attention."
Each individual aspect of Hyundai's cars was matched up against the
competition - right down to every suspension system, headrest, and
power outlet. The head-to-head comparisons clearly showed Hyundai
where it needed to make improvements.
To make sure they didn't forget, Hyundai managers have kept a copy
of Power's advice on a conference-room wall - vowing to keep it
there until they are given credit for surpassing Toyota's
reputation for quality.
Listen to Hyundai's American manufacturing team, though, and
they'll tell you that new technology isn't what gives them a real
advantage.
"I think a lot of the differences are more in the cultural aspects
of it," says John Kalson, Hyundai's production director for motor
manufacturing in Alabama. "Anybody can buy technology, and we have
some of the greatest techniques that are out there. The difference
is in that total mind-set and total philosophical belief that,
yeah, we can do it. And everybody pulls in the same direction. It's
just elevated like I've never seen before."
Hyundai's U.S. operations also have the kind of manufacturing
flexibility that the Big Three American automakers would drool
over. Sure, a lot of its workers are new to building cars, and they
need training. But they also aren't wed to tradition. When changes
are called for, adaptation comes quickly. And everyone is expected
to play a role.
"Right now, you can say people are in a honeymoon phase," adds
Kalson. "People are so excited to work here, there's energy all
around you. Everyone wants to be a part of it."
Including the competition.
Lesson Learned
The sheer speed of Hyundai's transformation still elicits awe.
"A lot of people in the industry would like to know how they did
it," says Szakaly. "General Motors has taken years and years of
numerous product cycles, and they still can't get to that product
level."
The lesson that Hyundai knows all too well, says Power, is that
it's harder to salvage a reputation than it is to remake a car.
"The last couple of years, GM has come out with J.D. Power awards
in their segment," Power says. "They've won a bunch. But people
still have a perception that some of their cars are not as
high-quality as the Japanese vehicles."
And perception sells cars.
"This effort by the Hyundai management has been almost unbelievable
- to do it as fast as they have," says Power. "We feel that it
takes two generations of models to get somebody into the major top
level, and it took [Hyundai] about five years."
A model generation, by the way, used to be six to eight years. But
with Hyundai barreling ahead, even that time frame has changed, as
manufacturers now look to gear up big advances in four to five
years.
Maybe Korean culture can be chiefly credited with the swift pivot,
says Power. The attitude from the top down has been to learn from
mistakes and make whatever improvements are necessary.
"The mind-set at Hyundai was that we need to know these things,
whereas some of the older players would say, 'We know all about
that.' To change the management thinking is the most important
thing - to have them understand that the consumer is the one
calling the shots today. That's why some of the manufacturers have
fallen behind the others. It's a tough thing, but I think Hyundai
was out to show they could do it and they wanted all the
straightforward information. They didn't come up with excuses -
they said let's fix it."
If there's any one criticism that Hyundai still finds hard to
shake, it's the sense of sameness in everything it puts on four
wheels. Line up Hyundai cars (like its four-door Sonata) in any
average mall parking lot, and they're among the first to get lost
in the crowd of similar-looking models.
But even that, says Szakaly, hasn't been a big drawback. In fact,
there might be a curious advantage involved.
"The people who want a high-quality vehicle - especially in the
area where Hyundai is competing, small-to-midsize vehicles - aren't
looking for a lot of flash."
WHAT'S NEXT
Hyundai, though, has shown plenty of flash in its financial
performance. And it plans to blaze an even bigger trail.
In 2004, the Hyundai way of offering the model with the best mix of
price, warranty, and quality in its class earned it 456,000 new
customers in the
United States. By 2008, says Szakaly, its
pedal-to-the-metal sales performance will likely zoom to one
million, especially if a rumored new U.S. plant is built.
By the time the company hits that figure, as its quality rep takes
hold, auto analysts expect Hyundai to raise its prices. And lest
anyone think the South Korean automaker is satisfied with its
growing North American acceptance, new plants are being built in
China and
India to cater to the car cultures that are taking to the
roads of Asia.
Chris Susock, who's responsible for quality at the Alabama plants,
knows just how far Hyundai has traveled. After all, when he got
started in the carmaking business for
Ford, the idea of going to
work for Hyundai never even crossed his mind.
"Back then," he says, "it was 'Buy a Coupe de Ville and get a
Hyundai for free.' "
But the work is paying off.
"The guy who bought the Hyundai last year is all of a sudden no
longer a joke," Susock says.
And the company he bought it from has no intention of forgetting
what it took to journey from punch line to powerhouse. When Power
met with Hyundai executives earlier this year, he was shown a
picture of the plaque from their Seoul headquarters that still
outlines his advice.
Power's description of Hyundai's efforts today?
"Top level."
.
“this effort by the hyundai management has been almost unbelievable — to do it as fast as they have,” says power. “we feel that it takes two generations of models to get somebody into the major top level, and it took them about five years.”