Editorial: Is Hyundai The New GM?

2008 was supposed to be a banner year for Hyundai. The company predicted a huge sales jump and promised a new flagship. And then 2008 actually happened. Sales were, well, you can guess that one. From a sales and PR point-of-view, the new, V8-powered Genesis was well received. From a sales perspective, not to much. Still, as one Hyundai Marketing VP put it, “if [consumers] aren’t forced to reconsider us, they won’t.” To paraphrase Elvis, perhaps we ought to give Hyundai a little more time. Meanwhile, the comparison between Hyundai and a young Toyota seem to have faded from view. In fact, you could make the case that Hyundai is more GM than Toyota. Well, if not you, me.Perhaps one of the biggest similarities between GM and Hyundai: a disfunctional relationship with its organized labor. Actually, the comparison leaves the GM-UAW relationship looking downright touchy-feely. In 2006 alone, Hyundai lost 118,293 vehicles worth $1.75b due to strikes and walkouts alone. When it refused to pay year-end bonuses of 1.5 times the monthly pay (even though the production goal wasn’t met… due to strikes and walkouts) workers (wait for it) walked out.Hyundai caved a few days later, with bosses calling the bonus as a “fresh deal” and “an opportunity to clearly recognize that appropriate remuneration can only come after workers achieve the goals.” But Hyundai management is well-trained by now. Their notoriously militant union has held a strike every year since 1987. Except for 1994. Maybe NAFTA scared them for a year. In any case, if the brand that was launched by Rodney King wants to join the Toyotas of the world, something will have to be done about its labor relations.But Hyundai management doesn’t have much moral high ground from which to fight. The antics of President Chung Mong-koo would make Blagojevich blush. Mong-koo was convicted on $100m embezzlement and bribery charges–and then freed on the grounds that he could “contribute to the company and the national economy one last time.” Although his son Chung Eui-sun has left the top spot at Kia, he’s still considered the dynastic heir apparent to his headline-grabbing father.Kia was supposed to provide an opportunity for Eui-sun to prove himself. That hasn’t panned out. High steel prices in Asia and union turbulence have played merry hell with Kia’s thin profit margins. “Kia’s profitability this year and its longer-term competitiveness depend largely on labor flexibility,” says Stephen Ahn of Woori Investments. His theory: it will be better for Eui-sun to keep his hands clean. With another Hyundai strike looming and some serious coming to terms with economic reality ahead, he may be right.So Eui-sun will stay on as head of Kia’s overseas operations, busying himself with successful Slovakia operations and a giant factory under construction near West Point, Georgia. While basking in the glow of Kia’s new products, from the current Euro Cee’ds to their forthcoming cousins, the Soul, Forte/Spectra and YN. But even on the product front, more symptoms of “Big Company Syndrome” loom for the Hyundai conglomerate.If the Genesis got people thinking differently about Hyundai, a super-Genesis will bring in the few remaining skeptics, right? That seems to be the thinking behind the Equus, the troublingly named, packed-with-technology, S-Class fighter. The car will clock-in with a reported price tag north of $95k. Luckily for Koreans, recent rumors of a stateside debut for the Equus means grey-market imports a la Genesis can begin. Even at a lower price, the Equus reeks of “Big Company Syndrome.” Whereas the Genesis adds least some enthusiast rear wheel-drive panache to the Hyundai brand, the Equus is a staid limousine. Its owner (Chung Mong-koo?) will likely never stray from the back seat, as he or she is shuttled from payoff to “political fundraiser.” More importantly, a $96k car in the midst of an economic downturn doesn’t say anything positive about the Hyundai brand that the Genesis doesn’t. A budget S-Class is one thing, a Hyundai Maybach is another. And that’s before you start on the name.In reality, Hyundai is letting Kia take over as the purveyors of cheap and cheerful. And as the “junior brand” picks up its game with the Forte and Soul, Hyundai is chasing the American brands with SUVs, Crossovers and RWD offerings. Product overlap between the two brands, a coming labor confrontation and untimely upmarket ambitions by Hyundai may be enough to take some shine off the Hyundai-Kia juggernaut. Moody’s is eyeing a credit rating cut for Hyundai-Kia, as a weak Won kept things from getting too nasty in 2008. This year will be tougher still.