Chung Moo Koo.
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It should be easy enough for Cho to recognize the secret of Hyundai's success. The South Korean company is following much the same formula that Toyota used decades ago to overcome its "cheap Asian import" stigma and become one of the world's most respected brands. When Hyundai first entered the U.S. market in 1986, its Excel sedan--an econobox with a $4,995 price tag--was an instant hit with frugal buyers. But customers soon discovered they were getting what they paid for: Excels were prone to quality-control problems and frequently needed to have parts replaced. Sales tanked, and Hyundai became a laughingstock. In 1998, Late Show TV host David Letterman listed his "Top 10 Hilarious Mischief Night Pranks to Play in Space." No. 8 read, "Paste a 'Hyundai' logo on the main control panel."
Hyundai has rapidly built up regard for its products through an almost fanatical attention to getting it right. Consumer Reports magazine recently named the Sonata the most reliable car in the U.S. And Hyundai placed a solid third among nonluxury brands in J.D. Power & Associates' 2005 survey of initial-car quality, beating out Honda. Six years ago, Hyundai ranked among the worst in terms of initial defects. The comeback is "astounding," says Chance Parker, executive director at J.D. Power in Westlake Village, Calif.
The architect of Hyundai's rise is Chung, who was named chairman in 1998. Although his father Chung Ju Yung founded Hyundai Motor in 1967, it was clear that the son would not get a free ride. Shortly before his appointment, the Korean economy was slammed by the 1997 Asian financial crisis and Hyundai was forced to lay off 25% of its staff. Complicating matters, Hyundai agreed in 1998 to acquire South Korean rival Kia Motors, which had to be assimilated. Chung had little experience with the automotive industry. He had spent most of his career managing a smorgasbord of affiliates, including a steel company, a pipemaker, a shipping-container manufacturer and Hyundai Motor's service business. When Chung broadcast his intention to turn Hyundai into a Top 5 automaker, few took him seriously. Hyundai, like many family-controlled Korean companies, was ultra-hierarchical and slow to change. Division chiefs ran their operations as personal fiefdoms. "When a problem occurred, each division would blame other divisions," says Lee Hyun Soon, a senior executive in research and development.
But Chung was quietly engineering a revolution. Revered by the staff as a member of the founding clan, he was able to gather information quickly and impose his will. He concluded that quality problems were the crux of the company's ills. Suh Byung Kee, Hyundai's president, recalls Chung bursting into his office five years ago and saying, "Quality is crucial to our survival. We have to get it right no matter what the cost!"