Hyundai CEO tells where he'll take his hot brand next

John Krafcik, CEO of Hyundai Motor America since 2008, has overseenfantastic growth, and now he has a different challenge: Keep the potboiling at a time when he can't count on the spotlight and dealerenthusiasm 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, wheremost models sold in the U.S are made, and is adding a third shift thismonth at its Montgomery, Ala., plant that builds its two highest-volumeU.S. models, Sonata and Elantra.

Muchof the momentum Krafcik inherited was his own doing. Before he becameCEO, Krafcik was vice president of product development and strategicplanning. When he took that job in 2004, Hyundai's share of U.S. newvehicle sales was 2.5%, according to Autodata.

Now, it's 5% andHyundai is the seventh-biggest car company in the U.S., ranked by sales,behind the Detroit Three and Japan's top trio, Toyota, Honda andNissan.

Krafcik is sure the production limits will give his rivalsadvantages, especially in the midsize sedan segment, where seeminglyevery brand has a new model or soon will.

"Competitors will takesome demand away" from the Hyundai Sonata, but he professes himself"comfortable" with the sales he expects to get. And like all successfulsales folk, he sees an opportunity in a limited supply: "I'd rather be alittle bit short on production and long on quality," he says.

Rushingto crank out ever more vehicles can cause quality shortcuts, ToyotaMotor CEO Akio Toyoda explained in 2010 to a U.S. congressionalcommittee probing the company's sudden acceleration complaints, "I fearthe pace at which we have grown may have been too quick," he testified,and it may have "confused" the company about its priorities.

In asession with USA TODAY reporters and editors, Krafcik offered a peek atHyundai's future beyond the explosive sales gains. He has some contrarynotions 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:

Gasoline engines

Hyundaiwill field some alternative-power models -- already it is selling agasoline-electric hybrid version of the Sonata, and a hydrogen-fueledcar is due in 2015, he says -- but the future belongs to the venerablegasoline engine. It "will still be the majority (powerplant) in 30years," he says.

Refined, evolved, downsized, engineered to afare-thee-well, for sure, but still the recognizable internal combustionengine traceable to the first practical car, built by Karl Benz in1886.

Even Hyundai's hydrogen car won't be exclusively analternative fuel model. "It would be a platform where we could also putin internal-combustion" engines.

Nowadays the politically correct view is that non-petroleum power is the future. Nonetheless, others agree with Krafcik.

Oneschool of thought says that bio-fuels made from waste -- cornstalks orwood chips, for instance, instead of feed corn as is done now --eventually could be produced in such quantities that they could be soldat the pump cheaper than gasoline.

"Suddenly you have the same oldengines but new environmentally acceptable fuels, and it's a whole newgame," says David Cole, chairman emeritus of the Center for AutoResearch and longtime observer of the auto industry.

A report thismonth from the non-partisan Congressional Budget Office says lifetimecosts associated with electric cars are "generally higher than those of aconventional vehicle or traditional hybrid of similar size andperformance." On average, CBO says, costs run $16,000 to $19,000 morethan a comparable gas-engine vehicle.

The CBO report says that anelectric or plug-in hybrid would "require a tax credit of more than$12,000 to have the same lifetime costs" as a similar gas-only vehicle.The government currently gives a federal tax credit up to $7,500 forelectric or plug-in hybrid vehicles for qualifying buyers.

Four-cylinder engines

Hyundaiwas a pioneer of four-cylinder power when it introduced the redesigned2011 Sonata midsize sedan only with four-cylinder engines, dropping theV-6 option. They are more sophisticated fours that use high-tech directfuel injection for both better mileage and more power -- even though thetechnology is costlier and noisier. Direct injection is making its wayinto the mainstream, but when Sonata was launched it was mainly apremium-brand feature.

"Four-cylinders are absolutely the future,"Krafcik says. Sonata's main rivals, Honda Accord, Toyota Camry andNissan Altima, all still have optional V-6s, though Ford and GeneralMotors are following the lead with only fours in the 2013 redos of theirFord Fusion and Chevrolet Malibu.

"The Japanese have their V-6sbecause they don't have the turbo fours ready. They fell behind" inengine development, says Aaron Bragman, senior analyst at consultant IHSAutomotive.

Hyundai still has V-6s in the long-wheelbase versionof its Santa Fe SUV, as well as V-6s and V-8s in its upscale Genesis andEquus models. Don't expect that to change immediately. In fact, theGenesis coupe got a more-powerful V-6 as part of its 2013-model update.

Unique cars for unique markets

"Wedon't believe in one-car-for-the-world, as some of our competitors do,"says Krafcik. "We view the American market as different from theEuropean market. Rear-seat packaging (for example) is more important inthe U.S."

That puts him head-on against his old employer, FordMotor, which has pushed hard for uniform global designs in its One Fordstrategy. That makes it possible to build any car at any of itsfactories around the world and requires only relatively small changes tosuit various markets. Thus, it is cheaper and quicker to get models tomarket.

Cars as mobile Internet connections

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.

Continual weight loss

Mazdaclaims that as part of its Skyactiv suite of technologies, it will cutvehicle weight 7% each time it renews a model. Hyundai cut about thatmuch from the Santa Fe SUV in the redesign for 2013, from 3,725 down to3,459 pounds.

Lighter cars take less energy to move, so use lessfuel. They also let automakers use smaller, lighter components, such asbrakes and suspension parts. If the government's new fuel-economystandards remain set for 54.5 mpg in 2025, lightening will beincreasingly important.

Ford is believed to be planning analuminum-bodied F-150 pickup for launch in 2014, which would cut about700 pounds, or 15%, from the current model.

Names for vehicles, not letters or numbers

"We're not believers in alphanumerics," he says.

Theindustry has moved toward such designations as a mark of prestige.Lincoln MKZ, Cadillac XTS and Acura RDX, for example. Mainstream brandsare sticking with names, such as Sonata, Malibu, Fusion, Altima andOptima.

Shifting Hyundai from a low-price nameplate

Hyundai is "making the transition from a value brand to a valuable brand," he says.

Sothe Elantra compact offers a heated steering wheel, heated front andrear seats, back-up camera and other features generally reserved forbigger, higher-priced cars. Of course, an Elantra compact so-equippedhas a midsize price: $25,000.

That's bad news for bargain-huntingcar shoppers, but probably inevitable -- features or not -- as a resultof Hyundai's maxed-out production. Anything in short supply gets moreexpensive.


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