As other carmakers struggle, Hyundai sales, products remain strong
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Mike Sieber, of North Attleboro, Mass., looks at new cars in the showroom of Pride Hyundai in Lynn, Mass.
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There was little to celebrate in the March report for domestic auto sales -- despite the fact that March sales were up industrywide 25 percent from February's figures.
Compared with sales in March 2008 however, sales last month were down 45 percent at General Motors Corp., 41 percent at Ford Motor Co. and 39 percent at Chrysler LLC from a year ago. In fact, no manufacturer reported a sales increase for the month.
So Hyundai Motor Co.'s 4.8 percent drop in sales stood out from a crowd largely reporting double-digit declines.
"We are satisfied with our overall performance in this difficult business climate," said Dave Zuchowski, Hyundai Motor America vice president of national sales. "The fact that we experienced only a nominal decline from an all-time March sales record in 2008 is acceptable to us. Even with continued economic stress and industry uncertainty, this performance is a clear indication that the Hyundai brand is sustaining its momentum and expanding its relevance."
How is Hyundai keeping from being swept away in the recession? By sticking to its formula: Offer more value than your competitors at a lower price.
But perhaps most importantly, Hyundai understood consumers' concerns and was the first automaker to offer them a break if they lost their jobs. (GM and Ford have since followed suit).
"Obviously, the Hyundai story is likely to be a case study for future business schools. It's the turnaround story, a company that had struggled in this marketplace, pulled out and essentially redefined [itself]," said Jeff Schultz, executive director of forecasting for J.D. Power and Associates. "If you look at what they have been able to do as part of a rebirth in a relatively short period of time, it's quite a story."
But it's not been an easy road for Hyundai.
In 1986, when Hyundai first hit the shores of North America, its flagship product was the Excel, which sold for $4,995 but was plagued by poor workmanship and questionable quality.
"Every Asian car company coming to the U.S. did the same thing. They came in with cars that made sense in their home markets, but not for the United States," said Hyundai Motor America CEO John Krafcik.
"We came in with a car that made perfect sense in Korea, but not here. It did not have the level of quality we would have wanted with the kind of usage it got in the United States. But we saw the problems very quickly and worked on them.
"It was those improvements that took us to third place in the JD Power initial quality study. That put us ahead of even Toyota in quality in the U.S."
The Santa Fe, introduced for the 2001 model year, was a watershed product at the time, making Hyundai a player in the U.S. market, analysts say.
Then, in 2006, Hyundai unveiled a completely new Sonata in the important family car segment. Its styling and quality made it a strong competitor to the Toyota Camry and Honda Accord.
That was followed by other noteworthy models, such as the redesigned Santa Fe, the Accent and the Genesis.
But what really put Hyundai on the map was its 100,000-mile, 10-year, limited powertrain warranty and 60,000 bumper-to-bumper warranty, said Mr. Schultz.
"When we offered those warranties, we knew we would have to have great quality or we could have gone out of business from the warranty claims from a financial standpoint," said Mr. Krafcik.
"We benchmarked cars from the best in the world, tearing cars apart, seeing what they did right and wrong, and in every case, designing the best possible system at a reasonable price that people could afford."
More recently, Hyundai introduced the AssurancePlus program, in which jittery customers concerned about losing their job could feel better about buying a new Hyundai because if they lost their job during the year, the company would take the car back without affecting a customer's credit ratings. The only exceptions are if there is excessive mileage or if there is damage or abuse to the car.
Focus groups had made it clear that this was no ordinary recession, that fear of losing jobs and incomes was far more widespread than it had ever been before, said Joel Ewanick, vice president of marketing for Hyundai Motor America.
"The same tactics that worked back in the '70s and '80s -- really back in the '30s -- were not working. I watched sales events, tent sales, even louder events and tent sales, and nothing moved the needle," he said.
"In our own minds, we offered this program to give consumers peace of mind and relieve the pressure they were feeling in their personal finances and in their budget," Mr. Ewanick said.
The newest addition to the program gives consumers three months of payment relief if they suffer a disability or lose their job. If they aren't back on their feet after that time, Hyundai will still take the car back.
The program results have been phenomenal.
"Looking at the first two months of the year, the industry was off in sales about 40 percent, while sales for 2009 for us so far are up 4.6 percent," Mr. Ewanick said.
"What was interesting to us is that there was a large percentage of people who said they weren't buying the car because of the new program. But they said they were buying the car because they appreciated the Hyundai offer and the way it was delivered," Mr. Ewanick said.
Hyundai still has a few hurdles to overcome, however, not the least of which is the issue of whether used Hyundais represent a good buy. Prices for used Hyundais continue to lag behind other makes.
"I don't think they will quite turn the corner until we see even stronger residuals for Hyundais," said Jack Nerad, editorial director of Kelley Blue Book. "I do think that is changing, and their quality story is making it clear to people that a Hyundai would be a good used car for them to buy."
Hyundai, as much as any other automaker, also will face increased competition as Chinese automakers enter the market.
The company is preparing for the challenges.
"We've been talking about bringing our most luxurious vehicle to the U.S. market, called the Equus. It's a big brother to Genesis," said Mr. Krafcik.
The company also is planning to introduce seven new or redesigned models in the next 24 months, all designed to maintain its momentum.
First Published April 3, 2009 12:00 am
