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Hyundai Enjoying Sharp Rise in US Sales - 2003-04-16

The automobile manufacturer enjoying the greatest sales growth in the United States over the past several years makes its home not in Detroit, Japan or Germany, but in Seoul, South Korea.

Hyundai began selling cars here in 1986. They entered the market when most of the major carmakers were ignoring the small car segment with its slim profits.

The Korean firm followed what is now the classic Japanese pattern in the U.S.: start small, build a customer base, expand the vehicle line-up and move up-market.

"I guess one classic example is the Santa Fe SUV [sport utility vehicle]. It's clearly an expansion from the car line that they previously had," said Jim Hossack, senior analyst for the California-based marketing and research firm Auto Pacific. "Also they have expanded their passenger car line to include the XG-350, which takes them significantly up-market. So, yes, they do appear to be expanding their market coverage and, as I look at their sales, I have to say I am awfully impressed.

The rise in Hyundai sales has been extraordinary.

"From 1999 to 2002, we enjoyed the biggest sales increase in the industry, some 312 percent increase over that four-year period," said Robert Cosmai, Vice President of National Sales for the company's U.S. operation. "And no one, no one - I mean the Toyotas, the Fords - no one enjoyed that type of an increase as Hyundai had over the past four years."

But 1998, just before the sharp rise, Mr. Cosmai describes as "the worst year in our history", the year in which Hyundai was widely criticized for quality problems in its cars. The company had to do something, and that "something" besides improving quality was the introduction of The Hyundai Advantage, the most generous product guarantee in the business, featuring a 10-year, 100,000-mile warranty. We asked Mr. Cosmai - why?

"We're not in the warranty business, we're in the automobile business," he explained. " But we felt we had made a lot of changes to improve our product quality. However, the buying public did not perceive it as such."

The warranty convinced many customers the company stood behind its products - and sales began to turn around. Auto Pacific's Jim Hossack is a believer.

"Given the situation Hyundai was in, I think it was a brilliant move and I think they've done it really well," he said.

But quality had to accompany Hyundai's promise to stand behind its cars. According to Brian Walters, director of product research at J.D. Power and Associates, they've succeeded.

"They had 42 percent fewer problems in 2002 than were reported in 1998," he said. "That is compared to an industry average of a 24 percent improvement. So Hyundai has done a tremendous job of improving and becoming much more competitive with the mainstream likes of Nissan, Volkswagen and Subaru."