Hyundai & Kia Motors the Early Years
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Hyundai and Kia Motors The Early Years and Product Development By Donald G Southerton Also by the Author Non-fiction The Filleys: 350 Years of American Entrepreneurial Spirit Intrepid Americans: Bold KoreansEarly Korean Trade, Concessions, and Entrepreneurship The Sioux in South Dakota (Contributing author) Chemulpo to Songdo IBD: Koreas International Gateway Fiction A Yankee in the Land of the Morning Calm: A Historical Novel Book One, 1890-1895 A Yankee in the Land of the Morning Calm: Gold and Rail Book Two, 1895-1900 A Yankee in the Land of the Morning Calm: The Northern Frontier Book Three, 1900-1907 eBooks Coffee, Cars, and Corporations: Thoughts on Korean Business and Popular Culture More Thoughts on Korean Business and Popular Culture: Volume 2 Copyright 2012 By Donald G. Southerton All rights reserved. 10 9 8 7 6 Library of Congress Cataloging-in-Publication Data Southerton, Donald G. 1953- ISBN 978-1477694381 Contents Acknowledgements Foreword Chapter 1 The Pony Chapter 2 The Excel Chapter 3 Brisa to the Pride Chapter 4 The Pride, Sephia, and Sportage Chapter 5 The IMF and Rebirth Chapter 6 The Road to Recovery Endnotes About the Author Acknowledgements This books content is built upon considerable historical and contemporary research. In crafting this work, I have benefited enormously from many. My first thanks must go to the Hyundai and Kia Motors organization for sharing their culture and accomplishments. I also owe a special thanks to Mark Juhn, longtime Hyundai and Kia Motors senior executive and international automotive authority. His ongoing support and assistance is deeply appreciated. This book would also not be possible without the strong support of family and friends; I would like to express my appreciation toDiana Southerton Rudloff for proof reading and editing, and Anna Cash-Mitchell for design and eBook formatting. Foreword Considerable content for this eBook came from the forthcoming publication The Hyundai Way, which will provide readers deep insights into the carmakers past, present, and future. Moreover, The Hyundai Way captures for the first time in the English language, Hyundais unique corporate culture, management model, expectations, and vision. For more details, see http://www.facebook.com/TheHyundaiWay Chapter 1 The Pony Since the early 1960s, Korean firms have entered into partnership arrangements with international carmakers, including Nissan (Datsun), Toyota, Mazda, Fiat, and Ford. In particular, the Korean government and key industrial groups forged these alliances as the best way to introduce advanced automotive technology to South Korea. In 1967, Hyundai Group entered the auto sector as a result of both the founder Chung Ju Yungs early ties to the car repair business and growing government pressure. Partnering with Ford Motor Company through an Overseas Assembler Agreement, Hyundai looked to assemble Fordcompactcars imported as knockdowns (CKD). Ford, in turn, would transfer technology and explicit knowledge, such as blueprints, technical specifications, production manuals, and training of Hyundai engineers. Interestingly, to accomplish the task, Hyundai gathered team members from its construction division who had excellent skills in project management and engineering backgrounds. Hyundai also recruited talent with experience in production from the Korean auto industry. Together with support from a team of 10 engineers dispatched from Ford, the Korean engineers, technicians and construction workers lived together in a makeshift structure near the plant, working 16 hours a day, seven days a week. Following the Hyundai model for taking immediate action and leveraging their background as a construction company, the Hyundai Ford plant was operational in 6 months, a record at that time for the 118 Ford assembly plants around the world. Initial car production at the plant focused on 2 modelsfirst the Ford Cortina Mark II and soon after the Ford Granada Mark II.Production targeted the South Korean domestic market with some limited export and production numbers grew from 614 cars in 1968 to 7,009 in 1973. The Pony Meanwhile by 1973, the Korean state-run Economic Planning Board (EPB) formulated The Long-Term Plan for Promotion of the Automobile Industry. In a policy-shift from CKD partnerships, the government mandated Koreas four leading automobile companiesHyundai, Daewoo, Kia, and SsangYongto submit detailed plans to develop a Korean car by 1975. Following similar tactics imposed across business sectors to build an import- substitution economy, the Korean government coerced automakers to embrace the new mandate or face restrictions in their current operations. Hyundai, a strong adherent of the state-corporate alliance, soon submitted a master plan for a new plant with a capacity of 80,000 Korean cars per year. To meet the challenge, Hyundai approached 26 firms in five countries to acquire required technologies: • 10 firms in Japan and Italy for car design • 4 firms in Japan and the United States for stamping shop equipment • 5 firms in the United Kingdom and Germany for casting and forging plants • 2 firms in Japan and U.K. for engines • and 5 U.S. and U.K firms for an integrated parts/components plant. As with the companys entry into shipbuilding and other technology ventures, Hyundai looked to the West for expertise. They soon hired former British Leyland Motor president Sir George Henry Turnbull as their new vice president. Turnbull, in turn, hired five other top British car engineers: Kenneth Barnett for body design, engineers John Simpson and Edward Chapman, John Crosthwaite as chassis engineer and Peter Slater as chief development engineer. Turnbulls exit from his position at British Leyland followed in the wake of the merger/restructuring of BMHandLeyland Motors. As a parting gift, he was, however, allowed any car from the lineup. He left with two Morris Marinas, a sedan and a coupecars Turnbull had developed. The Hyundai team used the Marinas as a base to develop the Hyundai Pony. Turnbull also brought with him the vision of using standard chassis to produce varying cars. In addition to Turnbull and his engineering team, the exterior design would come from the West with noted craftsman Giorgetto Giugiaro and the ItalDesign studio. Founded in 1968 by Giugiaro and Aldo Mantovani asStudi Italiani Realizzazione Prototipi S.p.A., the studio would become best known for its automobile design work, along with offering project management, styling, packaging, engineering, modeling, prototyping and testing services to manufacturers worldwide. Hyundais new Pony was a true collaboration of design, engineering, and production. For example, the engine, transmission, and suspension were all from a previous model of the Mitsubishi Lancer. Mitsubishi Motors supplied the engines in 1200cc and 1400cc sizes. ITAL designed three and five-door (hatchback) body styles to fit on the basic Marina-styled floor pan. The Hyundai cars borrowed heavily from Cortina design with MacPherson strut front suspension but retained the rear leaf springs. Parts costs were kept low by sourcing locally whenever possible. Parts also came from Hyundais Ford Cortina plant supply line. (The Ford relationship had been severed in part due to the government mandate for independent production.) Hyundai continued its reputation to meet government mandate deadlines and by late 1975 the Pony with 90% domestic content was in production. This made Korea the second nation in Asia, in addition to Japan, to have its own domestic automobile. The car was officially released to the public in January 1976. The Pony Blueprint The Pony was sold in three-door hatchback, four-door fastback, five-door wagon, and pick-up variants. George Turnbull continued to serve as a vice-president and director of the Hyundai Motor Company until the fall of 1977 when he left to join Iran National Motor Company. Chapter 2 The Excel On February 20, 1986, Hyundai Motor Company began selling the Excel, their latest production model, in the United States. Building on the success of the original 1975 Pony and then an updated 1982 Pony II, by the mid-80s Hyundai was ready to introduce a new front wheel drive X-1 model. They were also confident enough to tackle the worlds largest car marketthe United States. Hyundai X-1 Excel Following a common practice in the automotive industry, the X-1 was badged under a number of names depending on the market. For example, in Korea a sedan version was sold as Hyundai Presto, while in Europe the new X-1 kept the original Pony badge.i For Americans, the X-1 would be known as the Excelwith a reputation for low cost, breaking sales records and, sadly, a tainted quality image. Beginning in 1976 and prior to launching in North America (with Canada in 1985), Hyundai was exporting the original Pony to a number of markets. Today little recognition is given to these overseas operations and the teams that led these efforts. Early Pony export markets included: • Honduras, Guatemala, Panama, El Salvador, Ecuador,Colombia, Chile, Argentina, and Paraguay in Central & South America • Egypt, Bahrain, and Oman in the Middle East • Nigeria, Gabon, Sierra Leone, and Ivory Coast in West Africa, with Greece in Southeast Europe. To test the Northern European markets, Hyundai opened their first overseas subsidiary Hyundai Motor Holland in 1978. Presented in January 1979 at the Rai Motor Show held in the Netherlands, the Pony was then introduced locally in the Netherlands, Belgium and Luxembourg later that year. In 1980, the car was launched in the UK. Hyundai Motor Holland (Photo courtesy Mark Juhn) In a broader context, this international effort was part of the Korean governments push for a strong export-driven economy. The X-1 would play an important role in furthering this plan. To produce the new Excel, Hyundai invested an estimated $500 million in Korean production facilities with an annual capacity of 300,000 cars. The Excel launch also marked a new milestone for Korea and Hyundai sufficient mass production capacity, localization of parts, and the logistics to tackle the worlds largest car market.