It’s hard to feel sorry for car dealers. But go back a few years, and put yourself in Don Reilly’s shoes. It’s 1998, and Reilly, one of the 50 original dealers who had signed up to sell cars in the United States for Hyundai, was experiencing nothing short of a nightmare. The models on his lot had become the butt of jokes on late-night television. Overall U.S. sales for the brand were running at a paltry 90,000 cars a year. Hyundai Motor America had been without a CEO for months. And now Reilly was in a hotel conference room in Monterey, California — listening to a lawyer.
The lawyer was Finbarr O’Neill, Hyundai’s general counsel since the company’s U.S. launch in 1985. O’Neill was serving as acting chief operating officer while the parent company searched for someone — anyone — to lead the struggling brand.
“Fin got up and asked what direction we thought the company should be going in,” says Reilly. “We started throwing out suggestions, yelling out advice. Fin called time-out, left the room, came back with an easel with lots of paper on it, and started writing a bunch of things down.”
By the meeting’s end, O’Neill had recorded 100 suggestions — and was facing a decidedly less angry mob of dealers. “Fin said, ‘I can’t work on all of these at once, so let’s pick the top 10, and that’s where I’ll start,’ ” Reilly remembers. “That was Hyundai’s defining moment. It was the day that somebody took charge. It’s when we got leadership.”
Lawyers don’t usually end up running automobile companies. But a few months after that meeting in Monterey, Hyundai handed over the reins of its American unit to O’Neill. It was an utterly unexpected move. He wasn’t steeped in design. He wasn’t an engineer. He wasn’t a car guy. “Being the ‘acting’ anything is an awful job,” O’Neill says, with just a hint of an Irish brogue that still lingers after more than 40 years in the United States. “But I knew that I would have to keep working with these people after we found someone to take over.” So instead of trying to make waves, he says, “I just tried to hold things together.”
As it turns out, that was just what the company needed. Using his most lawyerly attributes — disciplined thinking, attention to detail, patience for steady progress — O’Neill began attacking the brand’s problems one by one. Four years later, the most unlikely CEO in the U.S. auto business is presiding over the industry’s most unlikely transformation.
Hyundai Motor America has achieved record sales for each of the past 18 months, and sales in the United States have quadrupled during the past four years, giving the company an American market share that is equal to that of Volkswagen. (This year, Hyundai expects that it will sell some 370,000 cars. O’Neill’s goal is to sell 500,000 units a year by 2005.)
Hyundai is so hot that it broke ground this year on a billion-dollar plant in Alabama — its first U.S. factory. The whole thing makes the lawyer in O’Neill a little uncomfortable. “We have been on the precipice of brand oblivion,” he says. “Now, with the turnaround, there is opportunity to bask in our own self-satisfaction. Hubris is our biggest challenge.”
Have No Fear, Your Warranty Is Here
O’Neill put Hyundai on a growth track by making a bold strategic turn. He understood that his first order of business as permanent CEO was to address the company’s biggest problem: worried customers. Put simply, he had to take the fear out of buying a Hyundai.
O’Neill knew that an eye-catching warranty would help relieve consumer anxiety about buying cars that Jay Leno liked to mention in the same breath as the Yugo. He also knew that such a warranty would involve risk. If Hyundai had to spend tens of millions of dollars fixing troubled vehicles, it would go out of business long before he could turn the brand around. The ultimate decision: to unveil what O’Neill and his executive team called “America’s Best Warranty”: 6 years of bumper-to-bumper coverage and 10 years of coverage on the car’s engine and transmission.
Why was O’Neill prepared to make such a bold bet? Because he knew something that the comedy writers didn’t: Hyundai had already started paying serious attention to quality. In the late 1990s, its cars were getting better and better, even as the brand’s reputation sank lower and lower. What seemed like a brash gamble was in fact a prudent move — classic O’Neill. “He won’t say something or do something that he can’t deliver on,” says Robert Cosmai, Hyundai’s vice president of national sales.
His nearly 600 dealers know that too — largely because O’Neill spends so much time in their showrooms. Most big-time auto executives show up at dealer meetings once or twice a year. They might fly out to schmooze their top performers. But O’Neill will visit 100 dealers this year, an average of two per week. “I’ve got to know if there’s anything Hyundai does that’s standing in the way of them selling cars,” he says matter-of-factly.
From Function to Fashion
For O’Neill, quality is job one — but it’s not his only job. Hyundai’s next big challenge: to go from functional to fashionable. “The brand remains in the bottom 10 of cars that people will consider,” reports George Peterson, president of AutoPacific Inc., a consulting firm. In fact, many customers still choose between a new Hyundai and a used car from a higher-profile brand. That isn’t a foundation for long-term success. “We want people to say at cocktail parties, ‘It’s okay to have a Hyundai in the driveway,’ ” quips O’Neill.
Here too the CEO is prepared to shift into high gear. Hyundai has been enjoying fat margins in the United States. But rather than dropping prices to gain share, it has pumped cash back into the cars in the form of trendier design, leather seats, and side air bags. Hyundai’s new compact SUV, the Santa Fe, has nabbed customer-satisfaction and safety awards and has become something of a cult favorite. Hyundai’s sleek, sporty, six-speed Tiburon is also getting positive reviews.
O’Neill says that he has paid close attention to what retailer Target achieved by combining low prices with cool design. That’s why he persuaded Hyundai to build a $25 million design center in southern California. O’Neill hopes that the center will allow Hyundai to appeal to customers’ emotions as well as their wallets. “I’ll never pretend to be a car guy,” O’Neill says. “But I don’t want to sell just a heater and keys.”
Indeed, as Hyundai prepares for a new phase of growth and expansion, O’Neill is acting more like the business visionary that he declined to be back in 1998. For example, he’s launching a high-profile marketing campaign for his newly energized brand: inspirational, emotional ads that barely mention the bumper-to-bumper warranty. “A car isn’t just nuts and bolts,” says O’Neill. “At some point, it has to be a reflection of your desires.”
Gee, he almost sounds like a car guy.
Sidebar: What’s Fast
More Than a Heater and Keys
A six-speed sports transmission, a V-6 engine with enough power to hit 180 horses, and a ripped design that pays homage to Ferrari. The 2003 Tiburon (above) is exactly what you wouldn’t expect from Hyundai.
But the Tiburon is just the kind of ride that Finbarr O’Neill’s team of marketers hopes will set the tone for Hyundai’s next step forward: designing cars that critics and consumers lust after. “Having a great warranty is beside the point with a car like the Tiburon. Basically, it just looks great,” says Paul Sellers, Hyundai Motor America’s director of marketing communications.
So far, consumers agree. The Tiburon’s sales hit close to 2,000 units in July alone. More important: Young males who spend thousands of dollars to trick out Acura RSXs and Honda Civics have turned their attention to the Tiburon, which already comes with 17-inch wheels on the high-end version — the latest must have for the hottest cars.
Fara Warner (firstname.lastname@example.org) is a Fast Company senior writer. Learn more about Hyundai on the Web (www.hyundaiusa.com).