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New day at Hyundai

Playing follow the leader on R&D isn't good enough anymore

Hans Greimel

Automotive News -- December 13, 2010 - 12:01 am ET

HWASEONG, South Korea -- For much of its 43-year history, Hyundai Motor Co. has been chasing well established global automakers it considers benchmarks.

But emboldened by improved quality and surging global sales, executives at the South Korean company say it's time to aim higher -- especially when it comes to technology.

"I don't want to be a fast follower -- that's the old Hyundai," says Yang Woong-chul, 56, who took over as global president of r&d at Hyundai-Kia in January 2009. "Now we'd like to be a technical leader, and we are very aggressively applying new technologies."

Becoming a technology leader is easier said than done, of course. And launching more advanced products within cost constraints may undercut the Hyundai brand's longstanding advantage of low prices.

But Hyundai is unmistakably aggressive. It vows to become an industry leader in fuel economy. Its current U.S. corporate average fuel economy rating is 34.4 mpg -- nearly meeting federal mileage requirements for the 2016 model year five years early.

Hyundai already is targeting 50 mpg by 2025.

To get there, Hyundai engineers plan to deliver an onslaught of drivetrain technologies. And on top of that are Hyundai's advances in safety, chassis control and telematics. The redesigned Sonata won top honors under new, more stringent U.S. crash tests.

"Their speed of execution is remarkable, and they set very high targets for themselves," says Dave Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Mich. "I'm not sure they are the leader but are definitely in the group at the forefront."

Hyundai has gone from a wannabe founded in 1967 into one of the world's biggest manufacturers. U.S. sales are booming, and the company's quality reputation has been transformed.

But Hyundai must also guard against overstretching its r&d resources as it rushes to meet exploding global demand for its vehicles with increasingly diverse and complicated technology.

Growing pains

"It's tough to balance the latest technology with low cost," says Karl Brauer, senior analyst at Edmunds.com. "The company may either lose its price advantage over competitors or cut profit margins."

South Korea's Chosun Ilbo daily newspaper issued a more dire warning.

"Hyundai must hit the brakes to avoid a Toyota-style crash," it said in a recent editorial.

The morass of quality problems facing Toyota Motor Corp. -- one of Hyundai's favorite benchmarks -- stands as a sober reminder of the dangers of rapid expansion.

Hyundai already has had to recall 140,000 hot-selling 2011 Sonatas because of a steering glitch. And its Kia Motors Corp. affiliate, which shares r&d functions with Hyundai, had to start recalling 104,000 vehicles in September because of a wiring problem that can cause fires.

Hyundai channels 5 percent of annual revenue into r&d. Its sprawling Namyang tech center, opened in 1996, sits in the countryside an hour's drive from global headquarters in Seoul. The company marshals some 10,000 employees around the world in its r&d efforts.

Namyang has three wind tunnels, hot and cold climate chambers, a snow tunnel, crash test facilities and proving grounds with 44 miles of roads. It can test for 71 different road surfaces.

In drivetrain technology alone, Hyundai's list of recent and upcoming achievements is long:

-- Single-motor full-hybrid drivetrain delivering class-leading fuel economy.

-- Lithium polymer batteries that Hyundai says are more durable and stable than lithium ion batteries.

-- The Theta family of downsized turbocharged engines.

-- Six-speed automatic transmissions for small cars like the Elantra.

-- Dual-clutch and continuously variable transmissions due as early as next year.

-- In-house eight-speed automatic gearbox, Korea's first, appearing next year.

Four upcoming models, including the redesigned Elantra, will get at least 40 mpg on the highway -- and those aren't just the top trim levels, but in entry-level packages as well.

Engine independence

Hyundai executives and engineers want the company to be self-sufficient in key technologies, and they view the engine as the most important element.

That obsession dates back to 1991, when r&d godfather Lee Hyun-soon engineered Hyundai's first in-house engine, the four-cylinder alpha powerplant. Lee, now vice chairman of Hyundai-Kia r&d, enjoys near-hero status in South Korea for finally breaking Hyundai's dependence on engines from foreign rivals, most notably Mitsubishi Motors Corp. of Japan.

Today the hybrid Sonata is a centerpiece of Hyundai's bid to raise its high-tech profile, Yang says. Its simple one-motor, one-clutch system has cost advantages, while delivering a best-in-class 40 mpg in highway driving. The hybrid went on sale in the United States this fall.

"As a latecomer, we need to have something to show we're better, and we do have something," said the U.S.-educated Yang, who came to Hyundai in 2004 after several years in r&d with Ford Motor Co.

Yang knows the risk of overextending. But he is confident that Hyundai, which has seen U.S. sales surge 23 percent to a record 493,426 through November, won't fall into the Toyota trap.

Key to managing the stress of rapid expansion, he says, is leveraging Hyundai's deep bench of affiliated suppliers to take the lead sometimes on developing new technologies.

"Trying to do everything in-house is very demanding," Yang said. "We are co-developing closely with suppliers, and that way we can better secure early development and better quality."

Hyundai also resists the temptation to quicken the product cycle. In the past several years it trimmed product lead time to 18 months, from 24. But there are no plans for another speed-up.

"No," says Yang. "Things are getting more complicated and may be more prone to quality problems. Nowadays, quality is the most important thing."

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20101213/OEM06/312139968/1436#ixzz18030VXbC

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