The Problem With Hyundai

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This is The Morning Shift, our one-stop daily roundup of all the auto news that's actually important — all in one place every weekday morning. Or, you could spend all day waiting for other sites to parse it out to you one story at a time. Isn't your time more important?

1st Gear: The World Is A Complex Place

There's hardly a company that's gotten better or smarter than Hyundai over the last decade. Their cars are better. Their marketing is better. Their reputation is better. If they build the Santa Cruz our heads will explode. I've definitely recommended some of their cars and, hell, they even make a nice RWD V8-powered sedan that any reasonable person would be happy to own.


You'd imagine things would be great. They're not. Hyundai's fourth quarter profit missed analyst estimates by a large margin, coming in at $1.5 billion, which Bloomberg reports is down 19% year-over-year.

So why is Hyundai having so much trouble? Two things:

  1. CREAM (Currency Rules Everything Around Me)
  2. Their own weird corporate decision-making.

Hyundai essentially built their empire on the back of a purposefully weak won (South Korean's currency), exporting cheap cars and bringing in sweet, sweet dollars and euros. This allowed them to heavily discount and gave them a ton of money to invest in their products which allowed them to skip about a generation of development. The yen was also stronger to the dollar, allowing them to outflank the competition.

Now it's coming to bite them in the ass. The won is strong and the yen weak so the Japanese – especially Nissan – are giving them a taste of their own discount medicine. Unions in the country are also now demanding better wages.

Even worse, Hyundai is uniquely sensitive to the Russian ruble which, last I checked, has a value hovering somewhere around two mismatched buttons.


Their other problems are more self-inflicted. For one, their cars are increasingly popular in China and yet they've been slow to build factories there. They pissed off both workers and shareholders when they spent $10 billion on office space in Seoul. They misled consumers about their fuel economy.

So what's their solution?

2nd Gear: DIVIDENDS!


While I'm generally pro-dividend for myself (hint hint Nick Denton), I'm not so much impressed when automakers in trouble are handing them out. You know who was handing out dividends to the bitter end? GM. It didn't exactly work out for them.

Hyundai, with all the bad news above, just handed out the largest dividend in their history, up 50% year-over-year (bringing them in line with most global automakers) according to Reuters.



They've managed to piss off both investors and South Korean workers and, given how they're shifting production around, it seems like Hyundai's leaders have chosen to appease investors first. Given how week their stock has been, this isn't the worst decision.


3rd Gear: It's Not All Candy Whistles At Toyota, Either


I'd rather be Toyota than Hyundai right now, but it's not like it's easy for them.

Globally, Toyota is in a decent position (not great, just decent), but in Japan they're going to have to face hard economic realities and higher taxes on cars that are keeping buyers out of the market.


The result? The WSJ is talking to analysts that think VW is going to take them down:

“My guess is that at some point VW does pass Toyota, simply because VW is a lot bigger than Toyota in China,” said Christopher Richter, an analyst at brokerage CLSA.


You can blame/thank China for that one.

4th Gear: Cadillac Going Boutique?


Cadillac's ability to make itself seem more luxurious and special is probably hampered by the fact that you can still walk into a Cadillac-GMC dealership in North Bumfuck, Ohio.

Thus, new Prez Johan de Nysschen thinks maybe they need some boutique stores and fewer dealers.


From The Detroit News:

"What I'd like our smaller dealers to do is consider an approach where we say to them, 'Listen, to be a standalone Cadillac store, we are no longer going to demand that you build us a 15-car showroom and invest $10 million,' " he said.

"We want to create a concept that's built around the notion of a small boutique shop," he said. "The idea is you don't have to be a large, Taj Mahal mausoleum brand store to be classy and sophisticated and premium. You can do a small two-car showroom with an investment amount that is kind of appropriate to the size of the sales opportunity in their local market, and we harness technology to supplement then what we can offer."

That could include creating a virtual showroom with TV screens and 3-D images to "help customers then experience what they can't physically touch," de Nysschen said.


How small does it need to be to fit an Escalade, tho? Also, clearly Tesla's influence continues.

5th Gear: Ford's Going To Tesla-ville


Ford didn't have to be the first company to build a hybrid-electric car, nor the first to build an all-electric car. In many ways, Ford's success in the second half of the 21st century has been in being the fast follower in the market.

Perhaps that's why Ford is going to open up a lab in Palo Alto, right around the corner from Stanford and Tesla.


As Gabe Nelson reports, there are already job postings:

Ford’s internal job listings show 16 open positions in Palo Alto, mainly for engineers, researchers and programmers. The scope of the facility reflects the importance of Silicon Valley to Fields, who visits the region frequently and wants Ford to embrace new technologies and business models.

"We're driving to be both a product and a mobility company, and ultimately to change the way the world moves,” Fields said during a speech early this month at the International CES convention in Las Vegas.



Mobility company:automotive company::tech company:media company.


On this day in 2009, "Gran Torino," a movie named for the 1972 Ford muscle car, opens in Australia and New Zealand. The critically acclaimed film, which starred Clint Eastwood as a retired Detroit autoworker, had opened across the U.S. earlier that month and later premiered around the rest of the world, eventually grossing more than $263 million, making it among Eastwood's most commercially successful movies.



Neutral: You Betting On Hyundai-Kia? Or do they have a rough decade coming?

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