Platform consolidation and reducing numbers of suppliers has been a key part of the industrial strategy to improve quality at Hyundai Motor. Kias 2nd gen Soul shares platform with the Kia ceed.

Platform consolidation and reducing numbers of suppliers has been a key part of the industrial strategy to improve quality at Hyundai Motor. Kia's 2nd gen Soul shares platform with the Kia cee'd.

Those who have been around a while and possess reasonable memories may recall the pickle that Korea's automotive industry got itself into in the late-1980s. Hyundai arrived in the US with its Excel model (Pony in some markets) in 1986 just as the Japanese were gently raising prices there due to the post-Plaza Accord rise of the yen. The new low price compact Hyundai was an instant success, US sales quickly growing to 350,000 a year. Kia piled in with the Mazda 121-based Ford Festiva and Daewoo got in on the act with the LeMans (Opel Kadett/Astra-based). Pretty soon Korean car sales in the US were up at 500,000 a year. In the background, the Korean government strongly backed the export surge.

And then it all went horribly wrong. Hyundai, in particular, had grown too fast to properly control quality and that started to show up in adverse quality survey results. Word spread that the latest Asian arrivistes came with major quality issues (not helped by the simple association, for many, of the Asian name Hyundai with Japanese-style quality). At home, Korean workers were demanding higher wages, eroding the cost advantage the Koreans had enjoyed just a few years earlier. By 1990, Korean car sales in North America had collapsed and it was to be a long road back after reputations had been so tarnished.

Little wonder then, that Korean vehicle manufacturers tread carefully these days.

I was in Korea last week with Kia and Kia's managers stressed the importance of quality. Kia has enjoyed spectacular growth over the past decade (tripling overall sales) and is a brand performing very well in export markets, brand image transformed for those who recall the basic Kias of yesteryear. It could sell more units in Europe if it wanted to and supply constraints are leading to suggestions that capacity additions are needed. Maybe, but getting things absolutely right with the product offerings, designs, quality, brand image and market positioning are all essentials for long-term success. Cars that fly off the forecourt because demand is a bit stronger than supply are also not necessarily a bad thing (creating better residuals, for one thing). It's preferable to be absolutely in the right place with all elements of the growth strategy before committing to even higher volume. That's one lesson from history.

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