Cancel the Room Service: Hyundai Pulls Out All the Stops to Right a Leaky Ship

Once a juggernaut, Hyundai’s recent sales and financial performance hasn’t kept pace with its lofty post-recession boom. The automaker now finds itself in one of the weakest positions in the industry for growth, all thanks to rising costs and a product lineup that doesn’t meet consumer demand.

To patch the holes and regain momentum, Hyundai has taken on some seemingly desperate cost-cutting measures. In this all-out scramble for profits, last week’s firing of its American CEO is just the tip of the iceberg.

According to Reuters, Hyundai is on course for a fourth straight year of profit decline. Costs are creeping up, now equal to 81 percent of revenue. Meanwhile, global sales estimates for 2017 have taken a haircut, from 8.35 million to 8.2 million, while 2016 sales could decline for the first time this century.

Because of a powerful, strike-happy autoworkers’ union, any changes in the personnel file needs to happen at the top, and that means a far less plush life for executives. It shouldn’t come as a shock to the upper echelon, as their ranks swelled 44 percent in the past five years. A 10-percent October pay cut for execs doesn’t fix the problem, but it’s something.

Executives must now cut back on travel expenses, company insiders tell Reuters, meaning fewer business trips, low-rent hotel rooms and coach class airline seats. Veal and chardonnay? Maybe if you’re lucky, pal. In other nitty-gritty areas, Hyundai has dialed back printing and lighting costs where possible.

“We’re in emergency management mode,” said one unnamed source.

While this sounds dire, the automaker still has ample cash in the bank, but there’s no escaping the reason for the cutbacks — a car-heavy lineup rebuffed by the public’s rapid shift to utility vehicles. Hyundai needs more SUVs in a hurry. Already, perhaps belatedly, there’s work on that front. In the U.S., Hyundai plans to expand its utility lineup with two smaller models, push the Tucson and Santa Fe Sport slightly up in size, and rename the top-shelf Santa Fe.

Other boxes on the checklist include bringing a redesigned Sonata sedan to market, pushing higher-end models (including those found in its Genesis brand), and delivering fewer vehicles to low-volume overseas markets.

The 2017 Elantra received good reviews and has since added Eco and turbocharged Sport variants, but the Honda Civic leads the compact class. There’s a chance that could change. Luc Donckerwolke, Hyundai’s senior vice president for design, claims next-generation models with “a different flair” are on the way.

While consumers will buy just about anything with all-wheel drive and a liftgate, watching Hyundai tackle Honda in a design duel should be interesting to watch.

[Image: Hyundai Motor America]