Hyundai Motor Replaces U.S. Chief to Revitalize 2014 Sales

Dec 30, 2013 1:33 am ET

(Updates with closing share price in sixth paragraph.)

Dec. 30 (Bloomberg) -- Hyundai Motor Co., South Korea’s largest automaker, is counting on new leadership at its U.S. unit to help the company revive market-share gains.

In naming Executive Vice President David Zuchowski as the next CEO of its U.S. operations from Jan. 1, Hyundai turned to one of its top salesmen to battle Toyota Motor Corp. to Ford Motor Co. in the country. He’ll replace John Krafcik, 52, who in his five-year tenure as U.S. chief oversaw Hyundai gain the most market share among major automakers until late 2012, when it began ceding back some of those gains.

Zuchowski will face the challenge of reversing Hyundai’s sales slump in its second-biggest market and improving its safety ratings. Hyundai is counting on the revamped Genesis, which won the North American Car of the Year award in 2009, and an overhaul of the Sonata mid-size sedan, the carmaker’s bread- and-butter model, to boost sales in the U.S.

“Dave is known to be a very active and results-oriented leader, who puts strong emphasis on the company’s sales operations,” Shin Chung Kwan, an analyst at KB Investment & Securities Co. in Seoul, said by phone. “Hyundai’s aggressive but logical management change comes after Hyundai’s disappointing IIHS test results and is in time to take steps to have its new products boost sales in the U.S. next year.”

Zuchowski, who joined Hyundai in February 2007, has been in charge of sales, field operations and dealer relations, the company said in its Dec. 27 statement. He has been in the auto industry for 33 years, beginning his career at Ford, and was responsible for sales at Mazda Motor Corp.’s U.S. unit prior to joining Seoul-based Hyundai.

Safety Awards

Hyundai rose 3.1 percent, the most since Aug. 30, to 236,500 won at the close in Seoul trading after Korea Economic Daily reported the carmaker plans to increase production at U.S. and Russia plants, and build a new factory in China. The company subsequently said it has no plans to build new plants.

In order to qualify for the Insurance Institute for Highway Safety’s Top Safety Pick and Top Safety Pick+ awards, the vehicle models must be rated “good” or “acceptable” in the small overlap front crash test, resulting in only 39 winners, according to the institute. Of those, 22 models also had front- crash prevention systems, which earned them the “plus” rating. By comparison, 130 models won the awards in December 2012, IIHS said.

Hyundai’s Elantra was the only model at the automaker to win a Top Safety Pick award out of 39 vehicles tested, according to an IIHS release on Dec. 19.

‘Mind Blowing’

Toyota received an “acceptable” rating for its 2014 Camry after the automaker strengthened its frame, subsequently regaining Consumer Reports’ recommendation. The Camry was previously given a “poor” rating in October, according to the Virginia-based IIHS on Dec. 19.

“It was mind blowing how fast and aggressively Toyota dealt with the crash test results,” said Shin at KB Investment. “I don’t think it’s a coincidence that news of John Krafcik’s replacement came just a week after IIHS announced the results. That is, John should have paid a bit more attention to get better ratings.”

Before its recent slowdown, Hyundai outperformed other automakers in the U.S. market during Krafcik’s tenure. He joined the company in 2004 as vice president of product development and strategic planning and became CEO of the U.S. unit in late 2008.

While Hyundai’s market share this year has slipped by 0.3 percentage point to 4.6 percent through November, the company claimed just 2.5 percent of the market in Krafcik’s first year with the company, according to researcher Autodata Corp.

U.S. Lawsuits

Hyundai and Kia agreed last week to spend as much as $395 million to settle lawsuits related to claims that they overstated the fuel-economy ratings of their vehicles.

The U.S. was Hyundai’s biggest market after China in the first nine months of the year, according to a company statement on Oct. 24.

Under Krafcik, who won the Global Auto News “Chairman’s Award for 2010,” Hyundai won its first two North American Car of the Year awards in 2009 and 2012, and introduced the revamped Sonata in 2009 that surpassed Nissan Motor Co.’s Altima and General Motors Co.’s Malibu.

The Hyundai Assurance program, a promotion in which the carmaker offered to buy back vehicles from customers who lost their jobs amid the recession in 2009, and redesigns to cars including the Genesis sedan and Elantra compact won over buyers.

Krafcik “oversaw the Korean carmaker’s growth while developing several innovative branding exercises,” Karl Brauer, an analyst for auto researcher Kelley Blue Book, said in an e- mail. “He would be a powerful addition to any automaker’s executive team.”

Stretched Thin

Chairman Chung Mong Koo has chosen to push for improved quality over substantial additions to Hyundai and Kia’s North American manufacturing capacity the last two years. That has stretched thin the carmakers’ ability to keep pace.

Chris Hosford, a Hyundai spokesman, declined to comment beyond the statement.

Hyundai last month unveiled a revamped all-wheel-drive Genesis premium sedan that will go on sale in the U.S. next year to revive flagging sales in the model’s largest market. The all- new Genesis, which competes with Bayerische Motoren Werke AG’s 5-series and Daimler AG’s Mercedes Benz E-Class in the mid-sized premium sedan market, will also be introduced in Europe next year, its first premium model in the market, the company said Nov. 26.

The new model and the replacement of the head of the U.S. unit come as the Seoul-based carmaker is suffering from an appreciating won.

Profit Decline

Third-quarter profit at Hyundai fell 11 percent from the previous three months to 2.14 trillion won ($2 billion), the company said Oct. 24. Net income advanced 5.6 percent from a year earlier.

The won has gained about 22 percent against the yen this year, curbing Hyundai and affiliate Kia’s competitiveness against Japanese automakers in U.S. exports. The won strengthened 0.5 percent to 1,054 won per dollar in Seoul on Dec. 27, data compiled by Bloomberg show.

Hyundai’s incentives in the U.S. surged 43 percent in the first eleven months of this year, compared with a 0.1 percent decline at Toyota and the market average of a 3.5 percent increase, according to Autodata.

--With assistance from Craig Trudell in Southfield, Michigan, Alan Ohnsman in Los Angeles and Seonjin Cha in Seoul. Editors: Chua Kong Ho, Young-Sam Cho,