What’s wrong at Hyundai Motor

I stopped at my uncle’s house during a business trip to the United States about 10 years ago. While handing me a beer, he suddenly popped a question that he thought I would be interested in as a business reporter. He asked if I knew how many countries exported finished cars to the U.S. I shook my head. He said five. I found it hard to believe, but it was true. Apart from Canada and Mexico, where American carmakers have expanded their industrial base, only Japan, Germany and Korea shipped finished cars to the U.S. market.

Germany ships 660,000 units and it is behind Korea, which ships 750,000. Only three countries account for America’s imports of more than $100 billion worth of cars a year. Hyundai and Kia Motor are household names in America, a major achievement.

And yet the auto-making group today faces unprecedented challenges.

It is quickly losing market dominance at home due to deep inroads by foreign brands. Abroad, it is losing competitiveness due to Korea’s strong currency and Japan’s weak yen. It now has one choice: The carmaker must develop a premium brand to compete with luxury names like Germany’s Mercedes-Benz and BMW, and Toyota’s Lexus. Hyundai has no choice but to chase German and Japanese rivals and maintain a distance from Chinese latecomers.

The value of a corporate brand shoots up once it attains a premium ranking. Consumers tend to stay loyal once they are hooked by a luxury brand. But Hyundai’s endeavors are met with skepticism. A premium is not won entirely by a product, but through the corporate image and reputation of the labor behind it.

German luxury carmakers tout master craftsmanship, or meister’s work. Tokyo emphasizes the monoukuri discipline, or perfection, of its Lexus manufacturing lines.

What about Hyundai, which has suffered 23 clamorous labor disputes over the last 27 years? It is armed with skilled engineers and creative innovators. But most consumers associate Hyundai to labor strikes and its protesting union workers clad in red vests. Union workers have walked out as usual this year. Consumers would not be blamed for shaking their heads and heading toward foreign car dealers to shop for their next cars.

Hyundai could lose its customers at home before it manages to find new ones in the premium-end market abroad. Its workers appear to have no interest in their employer’s goals or endeavors.

Workers could do wonders if they showed a commitment to their work and company. A corporate name can sparkle if its own workers join forces and volunteer to save a company in trouble. With some support, Hyundai could improve its productivity by shortening the time spent to produce a car, which is 26.8 hours, ridiculously higher than China’s 17.7 hours and India’s 20.7 hours and even America’s 14.7 hours.

What if workers volunteer to work on the lines for popular cars? Workers at the second factory in Ulsan, for instance, have agreed to jointly roll out the new SUV model Tucson to meet growing demand. The union could consider dropping its requirement that management seek its consent in deciding output levels at home and overseas. Instead, workers should stake their names and skills to produce the best sports utility car. Such a move would entirely change the image of the union and the carmaker.

Instead of trying to cut costs and wasting time fighting the union, the company should strive to seek more skilled engineers and craftsmen to make them the public face of Hyundai. A premium brand is not made through investments alone. It is built through joint efforts by the company and its workers. If the team is strong, the strong currency will not pose a threat.

We hope Hyundai’s union will surprise its critics and prove everyone wrong.

JoongAng Ilbo, June 9, Page B8

*The author is the industry news editor of the JoongAng Ilbo.

by Pyo Jae-yong