Cancel the Room Service: Hyundai Pulls Out All the Stops to Right a Leaky Ship

Steph Willems
by Steph Willems

Once a juggernaut, Hyundai’s recent sales and financial performance hasn’t kept pace with its lofty post-recession boom. The automaker now finds itself in one of the weakest positions in the industry for growth, all thanks to rising costs and a product lineup that doesn’t meet consumer demand.

To patch the holes and regain momentum, Hyundai has taken on some seemingly desperate cost-cutting measures. In this all-out scramble for profits, last week’s firing of its American CEO is just the tip of the iceberg.

According to Reuters, Hyundai is on course for a fourth straight year of profit decline. Costs are creeping up, now equal to 81 percent of revenue. Meanwhile, global sales estimates for 2017 have taken a haircut, from 8.35 million to 8.2 million, while 2016 sales could decline for the first time this century.

Because of a powerful, strike-happy autoworkers’ union, any changes in the personnel file needs to happen at the top, and that means a far less plush life for executives. It shouldn’t come as a shock to the upper echelon, as their ranks swelled 44 percent in the past five years. A 10-percent October pay cut for execs doesn’t fix the problem, but it’s something.

Executives must now cut back on travel expenses, company insiders tell Reuters, meaning fewer business trips, low-rent hotel rooms and coach class airline seats. Veal and chardonnay? Maybe if you’re lucky, pal. In other nitty-gritty areas, Hyundai has dialed back printing and lighting costs where possible.

“We’re in emergency management mode,” said one unnamed source.

While this sounds dire, the automaker still has ample cash in the bank, but there’s no escaping the reason for the cutbacks — a car-heavy lineup rebuffed by the public’s rapid shift to utility vehicles. Hyundai needs more SUVs in a hurry. Already, perhaps belatedly, there’s work on that front. In the U.S., Hyundai plans to expand its utility lineup with two smaller models, push the Tucson and Santa Fe Sport slightly up in size, and rename the top-shelf Santa Fe.

Other boxes on the checklist include bringing a redesigned Sonata sedan to market, pushing higher-end models (including those found in its Genesis brand), and delivering fewer vehicles to low-volume overseas markets.

The 2017 Elantra received good reviews and has since added Eco and turbocharged Sport variants, but the Honda Civic leads the compact class. There’s a chance that could change. Luc Donckerwolke, Hyundai’s senior vice president for design, claims next-generation models with “a different flair” are on the way.

While consumers will buy just about anything with all-wheel drive and a liftgate, watching Hyundai tackle Honda in a design duel should be interesting to watch.

[Image: Hyundai Motor America]

Steph Willems
Steph Willems

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  • Macmcmacmac Macmcmacmac on Dec 29, 2016

    Maybe they should have stuck with the restrained, Audi-like styling of the NF Sonatas instead of going all zoom-zoom-zoom with the 2011 restyle. Also V6 >> Turbo 4.

    • Bd2 Bd2 on Dec 30, 2016

      Actually, Hyundai went too far the other way and the current Sonata is styled too conservatively (which is why for its MCE, the current Sonata will be getting fairly extensive changes to its sheetmetal). Otoh, the current Tucson is a major improvement over its predecessor. Biggest problem is product/supply mix. The other automaker have crossovers, SUVs and trucks make up over 50% of their sales. Even with the increase in Tucson and Santa Fe sales due to greater supply, Hyundai lags way behind with crossovers only making up around 32% of its sales. Only other automaker that is still so reliant on cars is VW (and they are about to change that with the launch of a slew of new crossovers).

  • Dilrod Dilrod on Dec 31, 2016

    I just bought a CPO Sonata Limited. Nice thing about Hyundai's depreciation: I got a lot of value for the price I paid plus a good interest rate. I also test drove an Elantra to be sure I was getting my money's worth. It was nice but reminded me of my '89 Ford Festiva after driving that Limited. I like Hyundai, we used to have an '03 XG350L and my wife has an '11 Sonata SE. The XG had 235000 mi. on it when we bought it and we put on another 10k. I did a lot of work on it and I was impressed with the quality. After a brief affair with a Ford F150 that cleaned me out at the gas pump I ran back to the loving arms of Hyundai and got my own Sonata. Comments above are spot on about the Genesis rollout. My local dealership is pretty good, but the Genesis on the showroom floor sits off to the side in front of the service counter. DIY greasemonkeys like me stick our heads in it on the way to the service desk to buy parts, scaring away people who can afford them (or who at least think they can afford them). Lastly, my dealer has free popcorn. If that can't increase sales, nothing will.

  • Lorenzo Are they calling it a K4? That's a mountain in the Himalayas! Stick with names!
  • MaintenanceCosts It's going to have to go downmarket a bit not to step on the Land Cruiser's toes.
  • Lorenzo Since EVs don't come in for oil changes, their owners don't have their tires rotated regularly, something the dealers would have done. That's the biggest reason they need to buy a new set of tires sooner, not that EVs wear out tires appreciably faster.
  • THX1136 Always liked the Mustang though I've never owned one. I remember my 13 yo self grabbing some Ford literature that Oct which included the brochure for the Mustang. Using my youthful imagination I traced the 'centerfold' photo of the car AND extending the roof line back to turn it into a small wagon version. At the time I thought it would be a cool variant to offer. What was I thinking?!
  • GregLocock That's a bodge, not a solution. Your diff now has bits of broken off metal floating around in it.
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