Chung Moo Koo.
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With some of its biggest rivals in disarray, Hyundai sees an opportunity to build on its progress overseas. Slammed by rising costs and slumping U.S. sales, General Motors recently shocked investors by reporting a $1.1 billion first-quarter loss, and Ford has downgraded its 2005 profit forecast. Chung is determined to keep the pressure on. He's moving Hyundai's product line into larger, higher-profit vehicles. In October, Hyundai unveiled a small sport-utility vehicle, the Tucson. Later this year the company will launch a new high-end sedan for the U.S. market, the Azera, and early in 2006 it will introduce a minivan, the Entourage. Down the road Hyundai plans to roll out a larger SUV and its first hybrid vehicle. The company is also opening manufacturing plants around the world that should help it penetrate key markets. Hyundai is investing $600 million in a factory in the southern Indian city of Madras. Due to open in 2007, the plant will be Hyundai's second in India. And in May, Hyundai opened its first U.S. factory. The $1.2 billion plant in Montgomery, Ala., will produce 150,000 Sonatas this year and next year will start making the Santa Fe, Hyundai's popular SUV. The highly automated factory, Hyundai's most modern, is a sea of frenetic welding and painting robots. Components are shuttled about by electronic sensors in the floor. Chung says the factory gives Hyundai "firm ground as a global leader in the auto industry."
But even with its recent success, Hyundai's market position remains insecure, and the next few months will be challenging. With a host of new models coming out and its U.S. plant just revving up, Hyundai may have a harder time maintaining quality. "They're not out of the woods yet," says J.D. Power's Parker. Dwindling profit margins are another problem. The average Hyundai car retails for 10% to 15% less than a comparable Toyota or Honda in the U.S., but with rising labor costs and a weaker dollar, Hyundai must persuade customers to pay more so that profits keep growing. Last year Hyundai's earnings edged up a mere 2% while sales grew 10%. Lehman Bros. auto analyst Zayong Koo says, "They need to show a track record of good-quality cars in order for them to take that next step and raise pricing."
After all, Hyundai's road trip is really just beginning. Despite its impressive winning streak, the company is still only the world's seventh largest carmaker, with 3.3 million vehicles sold globally, and that includes sales by its Kia subsidiary. But Chung has grand ambitions. "We will make ourselves an invincible competitor," he says. Hyundai's larger rivals should mark those words whenever they check their rearview mirror for overtaking traffic. --With reporting by Daren Fonda/New York and Frank Sikora/Montgomery