Hyundai: Heading to a Second Fall?

With just a touch of brashness thrown in, those are the adjectives that respected Forbes auto commentator Jerry Flint has used to describe Hyundai, the South Korean carmaker that rose from new-import laughingstock in the 1980s to a well-respected maker of quality, dependable cars in today's market.

Hyundai has been on a roll, recently; its zeal to get new models into the marketplace has been amazing. From the Entourage minivan, the made-in-U.S.A. Sonata, and the high-end Azera sedan, the company has been churning out new models much faster than the Detroit automakers or its Japanese competitors. The latest in the spate of new models from Hyundai is the Veracruz crossover vehicle (which may be a candidate for a future clean diesel engine in years to come). The company also has plans to move up-market from its current top-of-the-line Azera by unveiling the Genesis, based on a rear-wheel drive platform, and sporting an optional V-8 engine. This will also push Hyundai's pricing up to the $35,000?--$40,000 range. (You have to wonder: Is the world ready for a $40,000 Hyundai? The Hyundai suits resisted the urge to set up a separate luxury division, ala Lexus or Infiniti, to sell the Genesis. But look at what happened to Volkswagen when it tried to sell its excellent Phaeton luxury car--although hailed as a technological tour de force, many potential buyers admired the car, but just couldn't get past the VW badge on the hood--much less be seen walking into a showroom that also displayed an econobox like the Rabbit.)

But Hyundai hasn't forgotten its low-end models, either; the company announced plans to bring to market a 5-door Elantra wagon and position it as sort of a small SUV.

But Hyundai's sales figures last year of 455,000 vehicles didn't exhibit the growth spurt of previous recent years; however, rather than rest on its laurels for a while (given that its quality ratings have shot up to good from abysmal, and sales have been on an upward tack), the company canned its American sales head, and fired its ad agency, too. Acceptable performance just wasn't good enough for the bosses back home in South Korea.

The company has grandiose plans for sales this year; the PR flacks at the home office in Korea trumpeted the news that it expects to sell 550,000 vehicles in the U.S. during 2006. The U.S. branch demurs, saying that it merely expects to sell 500,000 units, instead. Can it get that number, or will more heads roll? We'll expect to see further corporate attritions if the big shots in North America can't coax the sales projections they've set for themselves in the future: as many as 700,000 units sold per year by 2010. For those of you without a calculator handy, that works out to a sales increase of 54% over a four-year period. It's ambitious, to say the least.

Our take? In order to build these legions of vehicles, the company has expanded its manufacturing capability in the U.S., adding an engine plant in Alabama, and a factory for its Kia subsidiary in Georgia, to join its existing Alabama plant, which can manufacture up to 300,000 units a year (though currently it's producing less than that). Let's hope that Hyundai's sales forecasts ultimately match up with its projected plant capacity, or else more Hyundai executives could be standing in line at the unemployment office in the years to come.