What’s wrong with Hyundai, and how to fix it

Just days before Christmas, Hyundai Motor America (HMA) wished its president and CEO, Dave Zuchowski, unhappy holidays by firing him for failing to meet aggressive sales targets, according to sources who spoke to Automotive News.

Interim CEO, Jerry Flannery, will be focused on “enhancing the company’s brands, accelerating change for growth and customer satisfaction opportunities in the U.S. market,” according to an official statement by Hyundai. The automaker says it will begin an immediate search for a new president and CEO.

Obviously, Seoul isn’t happy, despite HMA achieving record sales in 2015 and setting what looks to be another record for 2016.

faces stiff competition in each of its volume segments, and after years of post-recession sales growth, opportunity is flattening at the same time that interest rates are rising. Unemployment in the U.S. market has dipped below five percent, further limiting growth potential for a brand that has traditionally specialized in entry-level vehicles. Consumers are favoring crossovers and trucks, but all automakers must strive to meet strengthening fuel economy standards, making it harder to build the vehicles people want and the vehicles regulations require.

The company’s next CEO must grapple with these realities, while re-setting the expectations of the mother ship. That’s not going to be easy.

What’s wrong with Hyundai?

From my perspective, Hyundai faces four major hurdles in its quest for market dominance:

American consumer and American pop culture still consider Hyundai and its sister brand to be entry-level, B-list nameplates. In reality, this is no longer a valid perspective, but it takes a long time to overcome a reputation for building cheap cars of shoddy quality.In a country where people like everything to be super-sized, and where trucks and SUVs dominate the sales charts, Hyundai is nearly a no-show. Concept vehicles demonstrate how the company might start to address this shortcoming, in the form of the Hyundai Santa Cruz and the Kia Telluride, but for now the biggest and most competitive vehicles that you can buy are the 7-passenger and the .Hyundai’s volume cars are bland. Styling is just as important as reliability when it comes to a consumer’s decision-making process, according to J.D. Power. The latest versions of the and , and the new , are neither as distinctive nor as attractive as their predecessors were.Sticker prices promote a perceived erosion of value. Buyers expect a Hyundai or a Kia to be less expensive and a better value than an equivalent Honda or Toyota (see #1 above). That’s no longer obvious to car buyers.

The trouble with Genesis

For 2017, Hyundai has launched a new luxury brand. It is called , the name of a coupe and a sedan that used to wear Hyundai nameplates. Two models are available, both sedans, one of which is simply a warmed over version of the old Hyundai-badged Genesis.

Confused? You’re not alone.

Furthermore, Genesis has no SUV in its lineup. Nearly 20 years ago, Mercedes-Benz recognized the consumer trend to SUVs when it debuted the ML-Class. But Genesis doesn’t have one, let alone an entry-level car that stacks up against a .

Genesis also has no separate dealership network. It offers nothing more substantial than valet pick-up and drop-off service for scheduled maintenance as an enticement to upgrade to what Hyundai claims is “authentic and relevant luxury.”

Yeah, umm, the G80 is the same as last year’s , shooting a giant hole in authenticity, and the brand is lacking an SUV in consumer marketplace ravenous for them, shooting another giant hole in relevancy.

Don’t get me wrong. The is a terrific car, one that I like quite a bit and would even buy for myself were I shopping in that segment and price class.

But Genesis is writing checks that reality can’t cash just yet, especially when marketing materials claim this: “We create the finest automobiles and related products & services for connoisseurs around the globe.”

That’s simply not true. Yet.

How to fix the problems

Company leadership needs to adjust its market share expectations, understanding that it still isn’t an A-list player in the minds of many Americans.

Shortcomings in its product lineup must also be addressed. The company needs some kind of a lifestyle pickup truck like the , and since the Honda is about as exciting to behold as a shower curtain, creating an exciting alternative ought not be too hard to execute. Also, the Kia Telluride needs a green light for production, getting on down an assembly line ASAP.

Even with these changes, a new president and CEO of Hyundai Motor America will be expected to grow sales at a potentially difficult time.

As the presidential election demonstrated, a large number of Americans are unhappy with their economic fortunes. Persistent under-employment and entry-level wages continue to erode the middle-class, and a sense of nationalism is oozing throughout society. Interest rates are rising, and debt related to college loans continues to grow, making it harder for a larger number of people to afford a car payment. Let’s not forget about how the stock market, a critical economic bellwether, is bubbling up at an unhealthy pace, portending a potential economic meltdown.

As bleak as this sounds, therein resides opportunity. This is what I think Hyundai needs to do:

1.) Embrace value

The Hyundai brand must embrace its role as a value proposition, allowing Kia to move upmarket.

Kia already possesses European interior design and materials, distinctive exterior styling, and engaging driving dynamics, and has been winning quality awards left and right. Plus, the sexy new Kia GT is expected to debut at the 2017 Detroit Auto Show, further cementing the brand’s upwardly mobile status.

Change the badge to a stylized “K,” which many owners do already, kill the entry-level , and let Kia rise to the premium position to which it credibly aspires.

2.) Make customers’ lives easier

Life is hectic and stressful, so the Hyundai brand should strive to make its customers’ lives easier. Think Saturn, but with high-quality products.

By adopting a one-price sales model, emphasizing its industry-leading warranty and roadside assistance plans, providing free Blue Link services related to safety, and embracing digital sales and home delivery of new cars, Hyundai could reinvent itself as a modern purveyor of unassailable value and customer care without relegating itself to discount brand territory.

By giving the average harried consumer an unbeatable customer service experience, and at a perceived bargain, Hyundai can win market share from mainstream brands that cannot or will not match the offer.

3.) Tout American manufacturing

Combat rising nationalistic sentiment by reminding consumers that Hyundai and Kia employ thousands of people in its Alabama and Georgia assembly plants, not to mention research, development, engineering, and design centers around the country.

People think of Hyundai and Kia as Korean brands, and while this is true, what people might not realize is that high-volume models such as the Hyunda Elantra, Sonata, and , and the Kia Optima and , are built right here in the U.S.A.

Maybe Donald Trump will even tweet about it.

4.) Make safety a brand hallmark

From robust, infallible structures that successfully disperse crash energy away from the passenger compartment to making critical collision avoidance technologies standard equipment, Hyundai needs to offer the safest vehicles within each segment in which it competes.

Beyond this, by making Blue Link services such as automatic collision notification free, and by providing a greater emphasis on the availability of and a longer trial period for safe teen driver services, Hyundai can ensure brand appeal with parents like me who are either searching for a safe family car or who are considering safe cars for their children to drive.

5.) Emphasize great design, quality and engineering

The current Hyundai Sonata and Elantra wear clean, conservative styling that is blandly appealing. Compared to the previous-generation Sonata and Elantra, however, they’re total snoozefests. The latest Kia Optima and Sportage models aren’t as attractive as the vehicles they replaced, either, though both retain distinctive character.

Furthermore, Hyundai needs to correlate its financial health with its product quality. The company has offered its industry leading warranties for more than 15 years, and if Hyundai and Kia products weren’t engineered to be as close to bulletproof as is possible, that warranty and associated claims would have pushed the automaker into bankruptcy by now.

6.) Forget Genesis

Back in the 1980s, when , , and arrived to take on the established luxury brands, each debuted with two cars: a flagship and an entry-level model. They undercut the competition on price, and gave wealthy consumers the promise of comfort, quality, and reliability. In other words, they offered to make their customers’ lives easier without compromise.

At the time, this was cool. This was different. And consumers rewarded , , and with varying degrees of success. Genesis launches at a different time in history, and to a different audience. It can’t simply run the Lexus playbook.

Plus, Genesis has seemingly forgotten why people buy luxury cars. People buy luxury cars because they can. And most of the time, luxury car buyers want to drive something that makes a statement, something that speaks for itself, something that requires no explanation.

Genesis, with its warmed over G80 and flagship-wannabe , was not ready for prime time. Hyundai should have dropped the Equus and kept the Genesis Sedan as Hyundai’s range-topping relative bargain.

7.) Stick with humor in advertising. Kevin Hart is worth the money.

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