- The Washington Times - Friday, May 24, 2002

While the Detroit-based big dogs fight it out with expensive incentives, South Korean automaker Hyundai Motor Co. enjoyed its 15th straight record month in April offering just $750 and confidence.
By the end of the year, according to Finbarr O'Neill, president and CEO of the automaker's American unit, Hyundai expects to beat 2001 sales by 7 percent or about 36,000 vehicles.
The automaker is off to a running start. This year's sales through April are 17 percent higher than the like four-month period last year.
It's a remarkable change of affairs for a company that, just four years ago, had a questionable reputation and sales so poor it almost pulled up stakes and put the Pacific Ocean in its rearview mirror.
Back then, the company simply was "not ready for prime time," said Jim Hall, vice president of the automotive consulting firm AutoPacific Inc.
Hyundai vehicles were known almost as much for their unreliable durability and less than perfect fit and finish than they were for their dowdy, downmarket styling and low prices. The automaker suffered dismal sales and rankings at or near the bottom of industry quality studies.
Chastened by its early setbacks, Hyun-dai began to pay more attention to both quality and styling. To correct the ailing public impression, it began offering a 10-year, 100,000-mile warranty on its cars. Then it added a $750 rebate.
It was just the bait to attract mostly young buyers to the Hyundai.
"The warranty became an important step because it was a tangible statement of our confidence, and it was also putting our money where our mouth is," Mr. O'Neill said.
The automaker has told its dealers it will offer the warranty until 2005, Mr. O'Neill said.
While the warranty is extraordinary, the rebate is less costly to Hyundai than the incentives offered by General Motors, Ford and Chrysler, which have gone as high as $3,000 in cash back to buyers.
Hyundai's quality is still somewhat below industry average, said John Tews, a spokesman for J.D. Power and Associates. The Agoura Hills, Calif.-based market research firm releases a widely read annual quality study.
But he added: "They've come a long way in a short period of time and they're heading in the right direction."
Internal studies performed by Hyundai indicate improvement, but Mr. O'Neill said the company is not yet nearly satisfied. The company's ambitious goal is to join Toyota Motor Co. and Honda Motor Co. in the tier of top-quality performers.
"I think we will get there. I think we will be considered a first-tier product choice. But right now, I think we're second tier," Mr. O'Neill said.
While the generous warranty helped turn around Hyundai's fortunes, an expanded product line has solidified its position in the low- to moderate-price market.
So much so, through the first four months of this year, it has outsold by just under 36,000 vehicles, General Motors Corp.'s Saturn, which was established as an "import killer."
But Mr. O'Neill says Asian automakers Mitsubishi Motors Corp. and Mazda Motor Corp. are his prime competition.
The median income of Hyundai's U.S. customers has grown from $40,700 in 1998 to $49,300, according to company data.
Customer loyalty has more than doubled since 1998 from 17 percent to 36 percent.
The company's profile in the United States will be raised even further when a new assembly plant being built near Montgomery, Ala., starts pumping out the Sonata and Santa Fe in 2005.
"It's a big injection to our own confidence, because what it says is this car company is betting this market is an important market for the future, and we expect to succeed," Mr. O'Neill said.
Hyundai also is broadening its product line to give customers who bought entry-level vehicles something to move up to.
One example is the XG350 sedan. At $24,000, it's the most expensive car in Hyundai's stable, yet reachable to a large number of buyers.
While Hyundai stretches its offerings, it must also be wary of what Kia Motors America is selling. Hyundai bought a controlling interest in the South Korean automaker in 1999.
The two companies were playing in the same price segment with similar product lines. The trick now, Mr. O'Neill said, is to make sure they don't compete with each other.
"The whole thing is brand differentiation. We don't want to be chasing the same customer with the same marketing dollar," he said.
AutoPacific's Jim Hall agrees, saying the company must "stratify" the lineups of Hyundai and Kia so they don't both occupy the same product segments.
One example of the dilemma will be marketing the new Kia Sorento and current Hyundai Santa Fe, similar-sized sport utility vehicles.
The Sorento is a more trucklike vehicle, while the Santa Fe is built on a car platform.
Hyundai's goal is to eventually be a full-line automaker and Mr. O'Neill said the automaker is slowly working in that direction with perhaps a crossover vehicle and a larger SUV in its future.


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