Once A Punch Line, Hyundai Racks Up Sales, Awards

In the early 1990s, Hyundai's image was so bad, the brand served as an insult in a Hollywood movie.

The film was Glengarry Glen Ross — David Mamet's tale of a down-and-out real estate office. Alec Baldwin plays a highly paid corporate heavy.

In once scene, he humiliates one of the agents he has come to fire: "You drove a Hyundai to get here tonight. I drove an $80,000 BMW."

Fast forward to this past January. The scene is the North American International Auto Show in Detroit. It was announced that the Hyundai Genesis was the winner of the 2009 North American Car of the Year. The Genesis was Hyundai's first luxury car.

The automaker followed with a Super Bowl ad that played on its underdog status. Actors playing executives at BMW and Lexus yell at their subordinates about Hyundai's improbable win. The executives repeatedly scream: "Hyundai!" "Hyundai!"

Then the voiceover announcer says: "Win one little award, and suddenly everyone gets your name right."

When Hyundai first came to the U.S., the name was synonymous with poor quality. Hyundai introduced the Excel, a small sedan, in 1986. But within a few years, the seat fabric was fraying and the bodies were rusting out.

"Reliability and durability — it couldn't have been worse," says John Wolkonowicz, who follows the car business for IHS Global Insight, a financial analysis firm. "It was one step ahead of a Yugo."

Hyundai became a punch line on late-night talk shows. Sales slid accordingly, and then the company spent the 1990s focusing on quality.

"All along, they have tried to model themselves after the best, which is Toyota," Wolkonowicz says. "They have been working on a plan of continuous improvement. And today, they are among the best."

But convincing consumers of that was another matter. By 1998, U.S. sales were headed for their lowest level ever — about 90,000. That year, Finbarr O'Neill, an attorney, took over the American operation.

"In September of 1998, we were on the precipice of oblivion," O'Neill says. "We had to make a decision as to whether or not we could profitably continue in North America."

Hyundai bet on itself. The company offered a 10-year, 100,000-mile warranty. The warranty essentially insured owners against most quality problems. Most analysts now consider it a pivotal marketing move. Hyundai also worked to improve exterior design, and it aimed to become the Target of car companies.

O'Neill, now president of J.D. Power, explains: "Target represented value, delivered in a stylish way, that you could be proud to own. You didn't have to explain that you shopped at Target, because it was a smart buy."

This year, Hyundai has ridden its blend of quality and low prices through the recession. Like all car companies, its sales fell. But not as far as others. Hyundai actually increased its overall share of the market.

John Krafcik runs Hyundai's American division. He says Hyundai didn't target any single company but adds that some of Hyundai's gains came from its higher-end Asian rival. "It's clear we've taken some share from Toyota," Krafcik says.

Hyundai doesn't emphasize it, but the rivalry with the Japanese automaker is natural, and historic. After all, Japan ruled Korea during much of the first half of the 20th century.

In the automotive world, Japan still holds the upper hand. Despite its losses, Toyota still sells more than three times as many cars in the U.S. as Hyundai.

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