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The Dude
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Posted by: David Kiley on February 12

Hyundai Motor America is having as difficult a time as most automakers these days coping with the dramatic drop in demand in autos. But one has to admire how the company is going about its business under the leadership of acting CEO John Krafcik.

Hyundai had an uptick in sales, by 14%, in January when just about every other company tanked with further double digit declines. But hang on. Hyundai sales are compared with a particularly bad month a year ago. And it not only tripled its incentives in January, but it also sent 7,000 out of 24,000-plus sales into fleets.

Hyundai sales chief Dave Zuchowski says that Hyundai is clearing out excess inventory, and that the company has taken down production at its Alabama assembly plant that makes santa Fe SUVs and Sonata sedans. Even Zuchowski admits that fleet sales above 30% is a “danger zone,” that will harm the company’s residuals. By year end, he says, the fleet percentage should be around 15%.

That aside, Hyundai, it’s worth pointing out, has been acting like a solid corporate citizen. Unlike other carmakers like Nissan and Suzuki, it did not pass up the Detroit Auto Show last month. True, it had a viable candidate for the North American Car of the Year award with its Genesis sedan, which it wound up winning at the show. But executives were making their case to Korean ownership to be in Detroit even without the award factoring in to the decision.

It would have been “bad form,” Krafcik told me at the show, before he knew the Genesis sedan won the award, to not come to the show when Detroit and Michigan are hurting so much. “It didn’t feel right not to come,” he said.

In a keynote speech at the Chicago Auto Show this week, Krafcik acquitted himself nicely, saying the industry must lead the way instead of dragging its feet on the issues of environment, safety and good business practices.

Check out these comments from his speech, and it makes me wonder if Ford didn’t make a huge mistake letting him go to Hyundai back in 2004.

“Let’s face it: Our reputation as an industry is horrible. In the U.S., we are viewed for the most part as a slow, dimwitted industry that is typically unresponsive to consumer and environmental needs,” he said. “If that weren’t bad enough, our executives are criticized for lavish compensation, abundant perks and unnecessary entitlements.


"We consistently damage our own brand reputations by resorting to costly discounts, rebates and desperate sales tactics to keep our plants running and to cover our fixed costs."

Krafcik called for ideas, such as a voluntary cap on executive compensation that uses a multiple of the average employee salary.
"What if our industry was the first to exercise a more inclusive form of capitalism that voluntarily restrained executive compensation to a reasonable multiple of average employee salary? And what if our industry adopted a uniform code of conduct regarding gifts, meals and business entertainment?

"It's time we exercised more discipline and more sensitivity in our approach to business. It's time to say goodbye to the days of overindulgence in auto shows, media launches, gift-giving, employee and dealer rewards, and executive compensation.

"There's a better way, a more modest and humble approach, that will help us move forward together through these revolutionary times."
I’m also impressed with the way Hyundai is handling its advertising and media. The company bought two iin-game ads in the Super Bowl this month. It actually looked more like three because they bought the last ad in the pre-game show, which had a 30 share, which means 30% of the TV’s on in America saw the extra ad for a lot less money than the in-game ads.

In last summer’s Olympics, it was Hyundai that had the first ad following Michael Phelps’ eighth Gold medal. The automaker made a major ad commitment to CNN during the third and fourth quarter to take advantage of the heightened audiences during the historic Presidential campaign. It had the first ad position coming out of President Obama’s victory speech on Election night, as well as the first ads out of Sarah Palin’s, Joe Biden’s and John McCain’s convention speeches.

Hyundai marketing chief Joel Ewanick says those were hard-won media placements and in line with the company’s brand strategy and customer targeting. “Hyundai buyers have high education levels and do a lot of research on the Net before they choose us,” says Ewanick. “They are very thoughtful and mindful people, and we try to reflect that in out media choices.”

During the week President Obama was inaugurated, the History Channel re-ran a multi-part series on the American Presidents. A geek for such programming, I was momentarily taken aback when I saw that the sponsoring brand for the series was Hyundai, not Ford or Chevy. “I’m glad to hear that,” says Ewanick.

The Super Bowl and being right in the middle of these historic moments being shared by Americans is all of a piece, a strategy the company is consciously pursuing in a strategic, but not overt, way. “We know times are tough, but we believe that Hyundai is a brand for the times that more people will discover…It’s important to keep our foot on the gas even in a down economy,” says Ewanick.
 
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