Getting Some Respect : Hyundai Puts Its Accent in Showrooms, to Industry Praise
Auto writers describe the car as roomy, with seamless bodywork and high-tech steering and braking systems.
Loaded with safety features, it “seems to be a solid, modern piece of work that fully belongs in today’s car market,” AutoWeek magazine reported. “One of the most refined and pleasant cars in its price range,” another reviewer wrote.
All of those plaudits, surprisingly, are going to the newest car from South Korea’s Hyundai Motor Co., the subcompact Accent. After nearly a decade as the Rodney Dangerfield of the import car market, Hyundai is finally getting some respect.
The auto maker is betting its U.S. future on the Accent. The car replaces the Excel, which established Hyundai as a serious competitor here when it was introduced in 1986 but was plagued with problems that gave it a bad reputation among motorists and dealers, who saw their sales plunge more than 50% from 1987 to 1991.
“That’s why we decided to replace it with an entirely new car with a new name,” said N. Douglas Mazza, chief operating officer of Hyundai’s U.S. import and distribution arm, Hyundai Motor America Inc. in Fountain Valley.
“Otherwise, no matter what we did, we were dragging the Excel’s reputation along with us. We were the Excel company.” Accent, he said, “will allow our other cars to reach the credibility levels they deserve.”
To do that, the company must have a renaissance. “When they first came here their products were touted as being as good as the Japanese made, but that clearly wasn’t the case,” said analyst Chris Cedergren of AutoPacific Inc. in Santa Ana.
“They had to go back and decide what they did wrong and how to get out of the hole. That’s what they’ve been doing for the past few years, and now they are introducing products that are light-years ahead of where they used to be in terms of fit and finish and overall quality,” Cedergren said. “They are coming a lot closer to the Japanese.”
Getting there will take time, the company acknowledges, for it must win back people like Richard and Carla Salvi. The Trabuco Canyon couple bought a new Hyundai Sonata sedan--the company’s largest car--in 1991.
“It was $6,000 less than a Toyota Camry,” Carla Salvi said, “but I think we would have been better off with the Camry. I’d never buy another Hyundai.”
The Salvis’ Sonata has had a series of small but irritating mechanical problems that have required Carla--who has three small children at home and considers her car a necessity--to spend “too much time” at the dealership getting things fixed.
Hyundai, however, is dealing with its problems. Under Mazza and former Hyundai Motor America President D.O. Chung, who just returned to Hyundai headquarters in South Korea after completing his U.S. tour of duty, the company has instituted a number of programs to turn things around. Mazza says Hyundai, South Korea’s biggest auto maker and part of one of the world’s largest manufacturing conglomerates, can afford to take the time to rebuild its reputation in the United States.
Hyundai Motor America has been selling more than 100,000 cars a year here, despite the unnerving skid of the late 1980s. Last year, with 126,095 sales, it outperformed each of the European imports and seven of the other dozen Asian nameplates.
For this year, Mazza is projecting 130,000 sales and says Hyundai could do more if the company’s two passenger car factories at Ulsan, in the southeastern part of the Korean peninsula, made more U.S. models. Production of cars for export will pick up in 1997, Mazza said, with the completion of a huge new automated plant at Asan Bay on the Yellow Sea southwest of Seoul.
Last year, Mazza boasts, was “the first time since our peak in 1988 that we were unable to meet the U.S. demand for our cars.”
Hyundai won’t be speeding up production just to satisfy demand, though, Mazza said. The company learned a hard lesson from its 1986-88 sales
push, when quality control failed to keep pace with the speeded-up factory production that was ordered to meet U.S. consumer demand for the low-priced Excel.
The result was cars with brakes that wore out quickly, air conditioners that didn’t cool well and engines that overheated. Although the majority of Excel owners didn’t run into those problems, those who did complained loudly, and the auto maker’s image was tarnished.
This time around, Mazza said, “we are imitating Honda with a slow-growth strategy while paying attention to our consumers.”
To help win back disaffected customers like the Salvis, Hyundai now sells all of its cars with a three-year warranty that includes 24-hour curbside emergency service. The company also regularly offers rebates and above-market trade-in allowances to Hyundai owners who replace older models with new ones.
The Accent, for example, comes with a $500 rebate that is doubled if the buyer already owns a Hyundai--bringing the base price below $8,000.
Most important, the company has reworked its entire lineup, re-engineering each model to get rid of the bugs. A new mid-size Sonata was introduced in 1994, and the Accent is this year’s offering.
For 1996, the company plans a new compact that will keep the name of the company’s current Elantra compact but will be based on an entirely new platform. And in 1997 Hyundai will bring out a new sports coupe based on the eye-catching HCD-II concept car designed in its Fountain Valley advanced styling studio.
After that, Mazza said, will come a “refreshed” Sonata for 1998 “and then a couple of surprises” that analysts said are likely to include the company’s first venture into the four-wheel-drive sports utility or minivan market.
For now, Hyundai is concentrating on the curvy Accent, which comes in Southern California-inspired hues like metallic mauve and mint green. The company will devote half of its modest 1995 advertising budget to promoting the Accent and won’t even begin running ads for its other models until July.
Its annual ad budget, estimated at about $100 million, equals what Ford Motor Co. is spending just on its new Contour-Mystique “world car” line.
The Accent has been available at dealerships only since Feb. 15 and not in quantity until the beginning of March, so no monthly sales totals are available yet. Mazza says internal projections have Accent accounting for 5,300 of a total of 10,000 Hyundai sales for March.
“We’re on track,” he said. “Our goal is for Accent to account for 55% of all sales this year.”
The company seems to have persuaded its dealers that the car is a winner, and dealers’ attitudes are critical to the success of any new car.
“If your dealers are mad at you, it transmits itself to the car owners,” said consultant Michael Luckey of Luckey Consulting Group in Woodcliff Lake, N.J. Hyundai’s dealers, he said, “soured as sales went south,” and a number of the early Hyundai dealers gave up their franchises in disgust.
Now the auto maker is spending time and money to mend fences. Chief among the initiatives launched by Chung and Mazza is a concerted program to improve dealer relations. “We’re seeing things happen that have never happened before,” said Charles Barker, owner of Huntington Beach Hyundai.
The auto maker, Barker said, recently allowed his service department to extend the three-year warranty to cover major repairs for a customer with a 4-year-old car with a transmission problem.
Mazza “has helped make them listen to us,” another Southland dealer said. “The Koreans at Hyundai can be tough. . . . It’s hard to get them to change when they come up with rules and regulations that just don’t make sense for our markets. But that’s changed a lot.”
Industry insiders say the Dealer Satisfaction Index published annually by Agoura Hills consultant J.D. Power and Associates attests to that. In its 1994 dealer rankings, Hyundai rose to 11th place from 19th place the year before.
Hyundai is also sending representatives to dealers’ service departments to review their procedures, provide advanced training and relay to headquarters their questions and concerns about Hyundai products and procedures.
One of Hyundai’s happiest dealers these days is Rick Case, who purrs like a well-tuned sports car when he talks about his three Hyundai locations in Cleveland, Atlanta and Fort Lauderdale, Fla. Sales since the Accent introduction “have just exploded,” he said.
The economic profile of Hyundai buyers has risen as well, Case said. “In the beginning, Hyundai was selling a car that attracted people who never could have bought a new car,” Case said, noting that the first Excel was priced at less than $5,000.
“The banks were financing everyone, and we had buyers who couldn’t afford regular maintenance after they made their monthly payments. That didn’t help the car’s reputation any,” he said. “But now, we sold 18 Accents last month in Cleveland, and 80% of the buyers were people who could have afforded a Toyota.”
The car is not selling as well in Southern California, where the company made its U.S. debut in the ‘80s and where many of its quality problems surfaced. “They sold a lot of cars here at first,” said Mike Shepard, owner of Santa Ana Hyundai, “so their problems affected more people here than in the Midwest or South.”
Shepard said he is selling an average of seven Hyundais a month. That compares to a 1994 U.S. dealership average of 21 Hyundais a month. For the year, U.S. sales rose 17% after six consecutive years of declines.
Still, the company “has a tough job,” said David Hillburn, a former industry consultant who helped Hyundai get started in the United States and now is a strategic planner with the Detroit office of public relations and advertising giant Young & Rubicam.
“This is an unforgiving market,” Hillburn said. “Even if they do everything right, it will take many years to climb to the next tier.”
Meanwhile, memories of the now-defunct Excel will continue to haunt the company. In its April issue, Consumer Reports magazine rates it as one of the worst used-car buys in the nation.
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Top Seller
Despite some difficulties, the Excel has always been Hyundai’s biggest-selling model. Share of Hyundai’s total sales, 1994:
Excel: 41%
Elantra: 36%
Scoupe: 12%
Sonata: 11%
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Sales Picking Up Speed
Hyundai’s 1994 U.S. sales increased after a six-year slowdown. The 126,095 cars sold were still less than half those sold in 1987, the company’s best year. (see newspaper for graphic)
1994: 126,095
Wheeling and Dealing
Hyundai began U.S. sales in February, 1986, with 63 dealers. By year’s end, there were 161 dealers. Since then, there has been a threefold dealership increase. (see newspaper for graphic)
1994: 489
Home in Fountain Valley
Most of Hyundai’s U.S. employees work at the Orange County facility, which houses its corporate headquarters, western regional office and Hyundai Motor Finance. Total non-dealership employment: (see newspaper for graphic)
1994
U.S. Total: 441
Fountain Valley: 351
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How Hyundai Ranks
Although its share of the overall U.S. market was only 1.4% for 1994, Hyundai ranked sixth among Japanese and Korean imports sold here. Top 10, cars only:
Sales Share Toyota 677,725 7.5% Honda 650,105 7.2% Nissan 485,710 5.4% Mazda 282,799 3.1% Mitsubishi 201,017 2.2% Hyundai 126,095 1.4% Acura 112,137 1.2% Subaru 100,619 1.1% Lexus 87,419 1.0% Infiniti 51,449 0.6%
SALES PERFORMANCE
During 1994, three of Hyundai’s four models showed improved sales, with only the Sonata dropping. U.S. sales by model:
Year Excel Sonata*** Scoupe* Elantra** 1986 168,882 -- -- -- 1987 263,610 -- -- -- 1988 261,782 -- -- -- 1989 147,863 34,698 -- -- 1990 100,590 29,840 7,018 -- 1991 66,116 20,925 26,370 3,922 1992 42,563 17,132 16,883 31,987 1993 42,980 15,438 13,835 35,381 1994 52,335 13,339 15,365 45,056
* Introduced August, 1990 ** Introduced September, 1991 *** Introduced January, 1989
DEALER, CUSTOMER SATISFACTION
Hyundai’s efforts to improve dealer relations and customer satisfaction have resulted in improvements in the past three years. Independent survey results show how Hyundai compares with the rest of the industry:
Dealer Satisfaction Index Customer Satisfaction Index Year Hyundai Industrywide Hyundai Industrywide 1992 96 99 96 129 1993 97 100 96 129 1994 106 100 110 135
Sources: Hyundai Motor America, J.D. Power and Associates
Researched by JOHN O’DELL / Los Angeles Times
