Value, warranty, design keys to Hyundai success

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South Korean automaker Hyundai is about to turn the page on its most recent and highly successful chapter of history in the U.S. and begin a new chapter.

When its redesigned 2007 Elantra entry-level car and its face lifted Tiburon sports car hit showrooms around the fourth quarter of this year, Hyundai will have completely freshened its entire product line. In fact, as John Krafcik, vice president of product development and strategic planning, pointed out in an interview, Hyundai's Tucson compact sport utility, introduced as a completely new model in 2004, will be Hyundai's oldest vehicle as of this fall.

"The focus of our most recent product offensive was product replacement," Mr. Krafcik said. Now Hyundai starts the process of refreshing the line all over again, starting with this summer's 2007 Santa Fe. But it will also add new models, as it has done with the Tucson, the Azera and now with the 2007 Entourage minivan.

The next completely new model for Hyundai will be an upper midsize crossover vehicle, to be introduced at the auto show in Detroit in January. News reports have suggested it will be called the Mesa, but Mr. Krafcik said that's wrong. A new name will be announced in coming weeks.

The new crossover will be equipped with a 3.8-liter V-6 engine and Hyundai's first-ever six-speed automatic. Mr. Krafcik said the vehicle is designed to be fuel-efficient and have the interior size and three-row packaging of a Ford Explorer or Honda Pilot.

"It's a unique take on that kind of vehicle," he said. "It has a unique design inside and out. It is pure Hyundai in the way the first Santa Fe had a unique feel. No one could look at the first Santa Fe and say that was derivative of something. It wasn't."

Initially, the crossover was going to take the place of a minivan in Hyundai's line. In fact, Hyundai had dropped plans about a year ago to produce the Entourage, virtually identical to the Sedona minivan from Kia, the sister company of Hyundai. But just after Hyundai made that decision, gas prices skyrocketed and the company noticed buyers of full-size sport utilities were switching to minivans. Since the development of the Entourage was already done, Hyundai quickly resurrected plans to offer the minivan, which just went on sale.

Longer term, however, Mr. Krafcik said Hyundai will focus more on car-based crossovers than minivans to cover its needs, though the minivan could stay in production alongside the crossovers. A decision on that has yet to be made.

While Hyundai is known for delivering value, as well as peace of mind, with its long warranty, design will be a key differentiator in the future, Mr. Krafcik said. "We've agreed within the company that design is our No. 1 priority; it's our No. 1 differentiating opportunity. So, you'll see increasingly new designs."

One of those news designs will be introduced at the auto show in Los Angeles in November. "You'll see a concept that is our take on a sporty, youthful entry-level car," Mr. Krafcik said.

The concept also demonstrates Hyundai is not abandoning the youth market, where it got its start. "A lot of people think Kia is the youthful brand and we're going upscale after older, wealthier customers (due to vehicles like the uplevel Azera)," Mr. Krafcik said. "Nothing could be further from the truth."

In addition to the upcoming concept in L.A., Hyundai demonstrates its commitment to the youth market, Mr. Krafcik pointed out, with the sporty, three-door Accent and this fall's face lift on the even sportier Tiburon.

The Tiburon undergoes a complete makeover in two years, at which time it could switch to a rear-wheel-drive platform or could stick to its front-drive configuration, said Mr. Krafcik, who added a decision on its layout would be made soon. "No matter what way it goes, the Tiburon will be more performance-oriented and appealing with unique Hyundai sheet metal," he added.

Going forward, Hyundai will continue to focus on safety, quality, value and design. In terms of safety, Hyundai will equip 73 percent of sales volume vehicles with standard stability control. The Insurance Institute for Highway Safety recently announced that stability control systems could reduce U.S. fatalities of all kinds -- in rollover and non-rollover crashes involving cars, as well as sport utilities, by 30 percent.

Hyundai expects dramatic rises in its long-term durability ratings as it has experienced with the focus on quality in the early days of ownership. Mr. Krafcik noted that Hyundai's warranty costs have been cut in half, thanks to quality improvements, even as vehicles covered by Hyundai's long warranties move into the high-mileage category.