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Interview with Hyundai's John Krafcik - Part 3 of 3

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John Krafcik at the Chicago Auto Show

John Krafcik talks to reporters at the 2009 Chicago Auto Show

Photo © Hyundai

AARON GOLD: What lessons are there for Hyundai in the Detroit meltdown?

JOHN KRAFCIK: Boy, that's such a complicated issue, and I spent fourteen years at Ford, so I've still got a lot of heart, sensitivity and empathy for the position of the Detroit Big Three. They're a smart bunch, you know, and I think Americans often forget that. They're very successful in other parts of the world, and they're the same company, and the same leaders, and the same management team, and they don't suddenly just get stupid when it comes to US product and the US market situation. There have been a lot of things that the Big Three have had to work against... structural things and structural costs, on the one hand. On the other hand, they have the incredible advantage of one hundred year histories, and having the opportunity to build remarkable brand loyalty through outstanding products. And I think the one thing that, at times, the Big Three, at times, not always, might have kind of lost sight of was the importance of delivering great products all the time and focusing on the customer. And I think fundamentally that's the one lesson that I take from the situation that the Big Three are in right now... we can never forget how important it is to design and deliver great products. When I talk to folks, having been a chief engineer at Ford, and understanding how difficult it is to run a vehicle program...I can tell you that one of the issues that the Big Three face, and really every automaker faces, is just how difficult it is to deliver your vehicle program on cost. To hit your cost target and deliver it. And in my experience at Ford, and my experience so far at Hyundai, I've found the best vehicles are the ones that miss their cost targets. And the ones the customers should probably avoid are the ones that successfully delivered the financial target, the cost target, right? In the long run, those cars didn't deliver their revenue targets, didn't deliver their customer satisfaction targets, but there was the short-term sense that, "Oh, I hit my cost target, I did a great job." I disagree strongly. And that's one of the things that we've focused on here at Hyundai. We have decided in many, many cases, in most of the cases where we had the choice between saving the money to hit the cost target or investing a little bit more to deliver a better interior or a better driving experience, we went ahead and made that investment. So, recommendation for you, Aaron, next time you're on a car launch, ask the chief engineer if he hit his cost target. If he says yes... run away quick.

AG: It seems that part of the problems [the Big Three are having] is that they've having no problem delivering great high-end cars, but it's the low-end cars where the profit margins are a lot slimmer that the problems seem to pop up. You've got the Japanese automakers, which have delivered some terrific small cars. You and I a couple of years ago rode together in that [Suzuki] SX4 when it first came out.

JOHN KRAFCIK: Yeah. Right.

AG: Fit and Versa are great cars. Yaris, I think, is a very good product. [The Japanese automakers are] refocusing their efforts on the smaller cars. They can't be making a ton of money on those cars considering all the content and the engineering. Is that a ground that Hyundai wants to re-stake? I mean, you guys made your name in cheap, reliable transportation. How important is it that the next Accent kicks some Fit, Versa and Yaris ass? Or is it okay just to have a car that's just okay, that appeals to a value-conscious customer and is not really dazzling?

JOHN KRAFCIK: We think it's tremendously important having great entry-level cars, affordable cars that can get new people into the Hyundai product line where we have traditionally had great loyalty. Once we get a customer into a Hyundai, they tend to stay with us. So we call it our gateway strategy, and yeah, you're going to see a tremendous next Accent. You're going to see continued excellence from Elantra, and both of those models are completely new in what we're calling 24/7 Version 2.0. So, you talked about, Aaron, at the start of this discussion, all the new model introductions we did, really from the period 05 through 07, [when] we launched seven all new cars in 24 months. Then we launched Veracruz and Genesis, and now we've, now we're in the midst of what we call, again, 24/7 Version 2.0, starting with Genesis Coupe, Elantra Touring, we've got an all-new Tucson coming later this year, the next Sonata, and then completely new versions of Accent and Elantra just around the corner. And they're going to be fantastic cars from an overall craftsmanship standpoint, quality of interior materials, driving experience, incredible fuel economy, which again is a real focus for us. That is, along with outstanding exterior design, interior packaging ingenuity is something we're really working on. Improving the fun-to-drive quotient of all of our cars, because that's really been a missing piece. When people think about Hyundai, rarely do they think "fun-to-drive", and that's been one of the passions that I've had since I've been here is trying to inject more of that into our brand. I think that's essential to grow the brand with time. And fuel economy. Those four things, I think, are really on our radar screen, and you're going to see that, even more than you do today. And I know you're an Accent SE fan, you're going to love the new Accent. You're going to love the new Elantra. You're going to love the production version of the Veloster. And some of the other stuff we have coming below Sonata.

AG: I don't know if you've had the chance to see the new 2010 Mazda3... They've gone real heavy on content. You can get it with push-button start, climate control... [it's a] really nice car. It would seem that that is something that would be easy for Hyundai to do in the Elantra segment. A higher priced car that delivers more content with better fuel economy. Is that something you guys are looking [at]?

Continued on next page...

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