Hyundai Lays Off 8% of U.S. Workers; Top Official Quits
Hyundai Motor America, hit by a 31% sales decline in the past eight months, said Thursday that it has laid off about 8% of its U.S. work force and that its top executive has resigned in a dispute over the auto maker’s business direction.
The company, the U.S. marketing arm for Hyundai Motor Co. of South Korea, said it has trimmed its 600-person staff with the firing of 50 administrative and support employees at its headquarters in Garden Grove.
Hyundai also said it will leave 11 vacant positions unfilled in an effort to trim operating costs. In June, the company imposed a hiring freeze.
The resignation of Greg Warner, who has served as Hyundai’s top U.S. official for less than 13 weeks, came as little surprise to industry observers.
Split Over Direction
“It is the usual penalty of declining sales,” said Arvid Jouppi, an auto industry analyst in Detroit.
The company said “differences over business direction” between Warner and officials at Hyundai’s South Korean parent led to Warner’s departure. Warner’s resignation as executive vice president and chief operating officer of Hyundai Motor America takes effect Friday.
Company spokeswoman Debbie Douglas said Warner--who joined Hyundai when it inaugurated its U.S. unit in January, 1985--is leaving “to pursue other opportunities.” Company officials declined to elaborate further and Warner could not be reached for comment.
Warner had been group vice president for sales and marketing when he was named in July to replace Hyundai Motor America’s founding executive vice president and chief operating officer, Max Jamiesson. Jamiesson resigned to start a Hyundai dealership in Northern California.
Reasons for Decline
Bruce Campbell, currently group vice president for parts and service, will serve as acting chief executive until a permanent replacement for Warner is named, Douglas said. Campbell, like Jamiesson and Warner, was a founding executive of Hyundai Motor America.
While the low-cost Korean car was big hit with consumers when it first appeared in the United States, Hyundai’s low advertising budget, steady price increases and slowness to change its design have combined with increasing competition in the subcompact market to drive sales down.
For the first eight months of the year, Hyundai sold just 132,440 cars in the United States, down 31% from 191,772 for the same period in 1988.
And despite earlier predictions that its U.S. sales would hit 300,000 cars this year, Hyundai now says it is likely to sell only 200,000 cars, compared to 264,282 last year and 263,610 in 1987.
The problems Hyundai faces aren’t all of its own making--the entire automobile market is in a slump, with sales nationally off 6% from last year.
And because it serves a well-defined niche market at the low-end of the price scale where it competes with newer used cars as well as with other domestic and import subcompacts, Hyundai’s sales would normally be expected to be hit hard in any slump.
The company “is simply in a very crowded field, where everyone is struggling to get a share of a limited number of sales,” Jouppi said.
But Hyundai Motor America hasn’t had an advertising budget that lets it compete with the big Japanese and American car makers. That has kept name recognition down, further affecting sales performance.
Finally, Jouppi said, “the novelty of its (low) price has worn off and the company didn’t change the appearance very much” until this year, “so those who liked it and bought it in the first years aren’t ready to trade in yet and those who weren’t attracted at first haven’t seen anything to make them want one now.”
Since its first appearance in January, 1986, the Hyundai Excel’s base price has increased from $4,995 to $5,724.
Hyundai did introduce a new mid-size model, the Sonata, at the end of 1988, but the base price is $9,695, and with a few options the average sales price easily climbs to $12,000.
To help boost consumer interest in its cars, the company recently added a V-6 engine to the Sonata line, redesigned its Excel model, instituted a cash rebate program and promises to introduce an Excel-based sports coupe next year.
