Hyundai CEO speaks on how company will charge ahead
Vehicles will be lighter, but gasoline and four-cylinder engines still staple.
John Krafcik, CEO of Hyundai Motor America since 2008, has overseen fantastic growth, and now he has a different challenge: Keep the pot boiling at a time when he can’t count on the spotlight and dealer enthusiasm that come with monthly sales records.
That’s because Hyundai’s rocket ride up the U.S. sales chart is over — because it can’t make cars any faster.
Hyundai is hitting full production capacity in South Korea, where most models sold in the U.S are made, and is adding a third shift this month at its Montgomery, Ala., plant that builds its two highest-volume U.S. models, Sonata and Elantra.
Much of the momentum Krafcik inherited was his own doing. Before he became CEO, Krafcik was vice president of product development and strategic planning. When he took that job in 2004, Hyundai’s share of U.S. new vehicle sales was 2.5%, according to Autodata.
Now, it’s 5% and Hyundai is the seventh-biggest car company in the U.S., ranked by sales, behind the Detroit Three and Japan’s top trio, Toyota, Honda and Nissan.
Krafcik is sure the production lim-
its will give his rivals advantages, especially in the midsize sedan segment, where seemingly every brand has a new model or soon will.
“Competitors will take some demand away” from the Hyundai Sonata, but he professes himself “comfortable” with the sales he expects to get. And like all successful sales folk, he sees an opportunity in a limited supply: “I’d rather be a little bit short on production and long on quality,” he says.
Rushing to crank out ever more vehicles can cause quality shortcuts, Toyota Motor CEO Akio Toyoda explained in 2010 to a U.S. congressional committee probing the company’s sudden acceleration complaints, “I fear the pace at which we have grown may have been too quick,” he testified, and it may have “confused” the company about its priorities.
In a session with USA TODAY reporters and editors, Krafcik offered a peek at Hyundai’s future beyond the explosive sales gains. He has some contrary notions that’ll keep Hyundai a very interesting company to watch.
What’s in Krafcik’s crystal ball, on big issues and some not so big:
uGasoline engines. Hyundai will field some alternative-power models — already it is selling a gasoline-electric hybrid version of the Sonata, and a hydrogen-fueled car is due in 2015, he says — but the future belongs to the venerable gasoline engine. It “will still be the majority (powerplant) in 30 years,” he says.
Refined, evolved, downsized, engineered to a fare-thee-well, for sure, but still the recognizable internal combustion engine traceable to the first practical car, built by Karl Benz in 1886.
Even Hyundai’s hydrogen car won’t be exclusively an alternative fuel model. “It would be a platform where we could also put in internal-combustion” engines.
Nowadays the politically correct view is that non-petroleum power is the future. Nonetheless, others agree with Krafcik.
One school of thought says that biofuels made from waste — cornstalks or wood chips, for instance, instead of feed corn as is done now — eventually could be produced in such quantities that they could be sold at the pump cheaper than gasoline.
“Suddenly you have the same old engines but new environmentally acceptable fuels, and it’s a whole new game,” says David Cole, chairman emeritus of the Center for Auto Research and longtime observer of the auto industry.
A report this month from the nonpartisan Congressional Budget Office says lifetime costs associated with
“We view the American market as different from the European market. Rear-seat packaging (for example) is more important in the U.S.”
John Krafcik, CEO of Hyundai Motor America
electric cars are “generally higher than those of a conventional vehicle or traditional hybrid of similar size and performance.” On average, CBO says, costs run $16,000 to $19,000 more than a comparable gas-engine vehicle.
Toyota just announced it is slashing the number of electric Scions it plans, from thousands to as few as 100. Toyota Vice Chairman Takeshi Uchiyamada said in Japan, according to Reuters: “The current capabilities of electric vehicles do not meet society’s needs, whether it may be the distance the cars can run, or the costs, or how it takes a long time to charge.”
And Chrysler Group announced it is suspending work on plug-in hybrids because the batteries are overheating.
uFour- cylinder engines. Hyun- dai was a pioneer of four-cylinder power when it introduced the redesigned 2011 Sonata midsize sedan only with four-cylinder engines, dropping the V-6 option. They are more sophisticated fours that use high-tech direct fuel injection for both better mileage and more power — even though the technology is costlier and noisier. Direct injection is making its way into the mainstream, but when Sonata was launched it was mainly a premium-brand feature.
“Four-cylinders are absolutely the future,” Krafcik says. Sonata’s main rivals, Honda Accord, Toyota Camry and Nissan Altima, all still have optional V-6s, though Ford and General Motors are following the lead with only fours in the 2013 redos of their Ford Fusion and Chevrolet Malibu.
“The Japanese have their V-6s because they don’t have the turbo fours ready. They fell behind” in engine development, says Aaron Bragman, senior analyst at consultant IHS Automotive.
Hyundai still has V-6s in the longwheelbase version of its Santa Fe SUV, as well as V-6s and V-8s in its upscale Genesis and Equus models. Don’t expect that to change soon. In fact, the Genesis coupe got a more-powerful V-6 as part of its 2013 update.
uUnique cars for unique mar
kets. “We don’t believe in one-car-for-the-world, as some of our competitors do,” says Krafcik. “We view the American market as different from the European market. Rear-seat packaging (for example) is
more important in the U.S.”
That puts him head-on against his old employer, Ford Motor, which has pushed hard for uniform global designs in its One Ford strategy. That makes it possible to build any car at any of its factories around the world and requires only relatively small changes to suit various markets. Thus, it is cheaper and quicker to get models to market.
uCars as mobile Internet con
nections. This is one area where Krafcik agrees with the prevailing notions in the industry.
“Moving nodes,” he calls cars of the future, and it’s happening fast.
uContinual weight loss. Mazda claims that as part of its Skyactiv suite of technologies, it will cut vehicle weight 7% each time it renews a model. Hyundai cut about that much from the Santa Fe SUV in the redesign for 2013, from 3,725 down to 3,459 pounds.
Lighter cars take less energy to move, so use less fuel. They also let automakers use smaller, lighter components, such as brakes and suspension parts. If the government’s new fuel-economy standards remain set for 54.5 mpg in 2025, lightening
will be increasingly important.
Ford is believed to be planning an aluminum-bodied F-150 pickup for launch in 2014, which would cut about 700 pounds, or 15%.
uNames for vehicles, not letters or numbers. “We’re not believers in alphanumerics,” he says.
The industry has moved toward such designations as a mark of prestige. Lincoln MKZ, Cadillac XTS and Acura RDX, for example. Mainstream brands are sticking with names, such as Sonata, Malibu, Fusion and Altima and Optima.
uShifting Hyundai from a low
price nameplate. Hyundai is “making the transition from a value brand to a valuable brand,” he says.
So the Elantra compact offers a heated steering wheel, heated front and rear seats, back-up camera and other features generally reserved for bigger, higher-priced cars. Of course, an Elantra compact so-equipped has a midsize price: $25,000.
That’s bad news for bargain-hunting car shoppers, but probably inevitable — features or not — as a result of Hyundai’s maxed-out production. Anything in short supply gets more expensive.