Chung Moo Koo.
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Although Chung's revelation might seem obvious, it wasn't to Hyundai's staff. A premium had always been placed on making cars quickly and cheaply. Even Suh, who is in charge of Hyundai's quality-improvement efforts, admits, "When I first came to Hyundai, I too didn't think quality cars were important." But the new chairman made blemish-free manufacturing the top priority. To break down interdivisional barriers, Chung forced designers, engineers and factory managers to work as a team to weed out potential defects. Twice a month, Chung summons senior managers into a conference room at his Seoul headquarters to analyze reliability issues, sometimes bringing in a whole car and lifting it up on a hydraulic platform to get a firsthand look. Likewise, the company's 68,000 workers are encouraged to make suggestions for improving quality in regular factory-floor meetings. Late last year, Yu Seung Byul, a quality inspector in Hyundai's Asan factory in Korea, invented an improved method for detecting missing bolts and brackets in hard-to-see nooks inside the car frame. He and his managers had spent weeks debating how to solve the problem. Then, says Yu, "I woke up one morning, looked in the bathroom mirror and realized, 'That's it!'" He simply installed mirrors above the assembly line for a better view of the car's innards.
In the short run, Chung's obsession with quality can be costly. Last year he delayed the launch of a new Sonata in Korea for two months while engineers cleaned up 50 minor defects. In 2003 he asked senior R&D executive Lee to get rid of an annoying noise that grinding gears were making in the transmissions of Kia Amanti sedans. "I told him that we'd lose two months of sales," Lee recalls. "The chairman said, 'If it's for quality, it's O.K.'"
Of course, quality isn't everything. Chung has also ramped up efforts to ensure that Hyundai is competitive in technology and styling. Hyundai's R&D budget has expanded 110% since 1999, to $1.6 billion this year. Hyundai invested $200 million to open or expand R&D centers in California, Michigan and Germany; a $60 million proving ground in California's Mojave Desert opened in January. And in South Korea, he expanded R&D headquarters, adding a new design center complete with a 3-D cinema for viewing virtual models. Lee says Chung visited his office recently and asked, "Do you have enough money?" With a wry smile, Lee says he told his boss he didn't. Chung immediately offered several hundred million dollars.
Meanwhile, Hyundai has also needed to be innovative to woo back reluctant customers. In 1998 the company began offering a 10-year warranty, the best in the industry at the time. And to compete with bigger brands, Hyundai loaded up its models with features that many of its rivals sell only as expensive extras. A 2006 Sonata for the U.S. market comes with six air bags (most competitors offer only four as the standard), a six-speaker CD and MP3 player, and an advanced antilock-braking system--all for less than $20,000.