All of these statements about the American companies who are taking over Japanese
operations are true.
Because of the poor quality of its cars, Hyundai watched its U.S. sales drop from 264,000 cars to
90,000 cars in just two years. Hyundai cars ranked 26th out of 35 car brands in terms of initial car
quality as measured by the influential J. D. Power Initial Car Quality survey. With $6.6 billion in debt,
a $1 billion investment for a new manufacturing plant in Alabama, and the company’s first-ever loss,
Hyundai’s new chairman, Chung Mong Koo, declared that improving quality was the only way to fix
The challenge for Chung was to get his managers to put quality, not costs, first. So he sent a
visible, meaningful message that poor quality would no longer be tolerated. During one plant visit,
Chung demanded to see under the hood of a car on the production line. He was furious when he saw
loose wires, tangled hoses, bolts painted four different colors—a tremendous deviation from what the
engine compartment was supposed to look like. On the spot, he instructed the plant chief to paint all
bolts and screws black and ordered workers not to release any car unless all was orderly under the
hood. He then publicly declared that Hyundai would produce higher quality cars than Toyota, and that
its cars would lead the industry in quality.
Today, each workweek starts with a demanding three-hour meeting attended by managers,
engineers, designers, and suppliers. In his large boardroom, Chung displays Hyundai cars on rotating
turntables or mechanical lifts, whatever is required for those in attendance to see up close what
problems need to be fixed. Hyundai managers now measure everything. Hundreds of charts on the
walls of every Hyundai factory measure the number of times and the degree to which a process has
produced parts that differ meaningfully from the quality standards for those parts. The quality
department at Hyundai has grown from 100 to 1,000 people, all of whom now report directly to CEO
All employees share their ideas about how to improve quality because Chung communicated to
workers that their ideas were important and welcomed. To prove it, he rewarded them with bonuses
averaging $150 per employee. At one Hyundai factory, workers have suggested 25,000 ideas for
improving quality, 30 percent of which have been implemented in the factory. For instance, a worker
noticed that the Hyundai Sonata and XG350 (now sold as the Azera) had identically sized spare tires
but different-sized spare tire covers. Though it sounds trivial, using the same spare tire cover for both
cars saves Hyundai $100,000 a year.
Hyundai addresses customer complaints as quickly as possible, and these quick responses have
had dramatic results. For example, Hyundai Santa Fe’s score in J.D. Power’s Initial Car Quality survey
dropped from 149 problems per 100 cars (PP100) to 93 PP100 in just one year.
Finally, if the greatly improved quality isn’t enough to convince you to buy a Hyundai, the
company believes that its 10-year/100,000 mile warranty may be enough. The longest, most
comprehensive warranty in the auto industry shows the confidence the company has in its cars. And
those extensive warranties probably won’t cost Hyundai much either, as the improved quality of its
cars has cut the cost of warranty repairs, which are paid for by headquarters, by 35 percent over the
last three years.
78. Refer to Hyundai. When Chung Mong Koo, Hyundai’s new chairman and CEO visited a Hyundai
plant he strode onto the factory floor and demanded a peek under the hood of a Sonata sedan. He didn't
like it when he saw loose wires, tangled hoses, and bolts painted four different colors. The fact that this
car was not being built the way it was designed and the fact that its manufacturing flaws resulted in it
not working as it was supposed to indicated that Hyundai had a problem with ____.