Commentary

Hyundai Changing CEOs To Move Out Of Slow Lane

Stalled in a slump of sales to consumers who are favoring gas-guzzling bigger cars, Hyundai has dismissed Dave Zuchowski, the head of its U.S. unit, temporarily replacing him with chief legal and safety officer Jerry Flannery.  

“Hyundai said Flannery is tasked with boosting the company’s brands, and quickening growth and customer satisfaction for the U.S. market,” writes Melissa Burden for the Detroit News.

But accounts indicate its an interim appointment as Hyundai looks for someone with the skills to steer it out of relying on less-lucrative fleet-sales.

Zuchowski, who was widely respected by dealers, was axed for failing to meet internal sales objectives, multiple sources tellAutomotive News’ David Undercoffler, who broke the story. Zuchowski joined Hyundai as U.S. sales chief in 2007 and was named in December 2013 to succeed John Krafcik — who now heads Alphabet Inc.’s Waymo — as CEO “just as Hyundai’s growth was beginning to slow,” he writes.

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“While the brand survived and even thrived early in his tenure as sales boss following the Great Recession, it struggled to maintain its pace as falling gasoline prices led the U.S. market to shift away from Hyundai’s bread-and-butter small cars and toward crossovers and SUVs, segments where the brand is weak or nonexistent and where supply shortages have dented sales,” Undercoffler continues.

Naming nameplates, Seoul, Korea-based “Hyundai's stalwart sedans, the Elantra and Sonata, have become less enticing to American shoppers,” points out Nathan Bomey for USA Today. “Discounts as a percentage of Hyundai transaction prices rose 13% in November, compared to a year earlier, according to TrueCar.” 

“The companies doing particularly well are those that have sport-utility vehicles and trucks,” Autotrader.com analyst Michelle Krebs tell Bomey. “And the ones that are heavily reliant on cars are doing not as well. A company like Hyundai, [while] it heavily incentivized vehicles, it doesn't have big truck profits to offset those with, like Ford or GM or Chrysler.”

Hyundai Motor America is based in Fountain Valley, Calif.

“Zuchowski has been praised by dealers for trying to help the company become more responsive to U.S. market trends,” writes Adrienne Roberts for Market Watch. “The executive, however, couldn't deliver the type of growth executives in Korea wanted. And the brand continues to rely too heavily on low-margin sales to fleet buyers, including rental car deliveries that erode reputation and ding resale values.”

“The move comes only a month after Mr. Zuchowski used the Los Angeles Auto Show to outline a plan to revamp the company’s line of sport utility vehicles, a weak spot that has hurt sales in the last few years as Americans flocked to larger vehicles,” Neal E. Boudette writes for the New York Times.

“In the first 11 months of this year, Hyundai’s sales have grown by only 1.3%, to 707,485 cars and light trucks, from the comparable period in 2015. The Kia Motors Corporation, an affiliate controlled by the Hyundai Motor Group, has seen its sales rise by 3.8%, to 593,245 vehicles.”

Not that Hyundai is doing all that well elsewhere on the globe.

Zuchowski’s departure comes as Hyundai “is set to undershoot its global sales target of 8.13 million for a second straight year. It also follows the replacement of Hyundai’s South Korea sales chief and its head of China in October, as the carmaker struggles in an environment of low oil prices,” writes Song Jung-a for Financial Times

But fortune may be smiling on the automaker in a perverse way. Daiwa analyst Chung Sung-yop tells Song that Hyundai’s business environment should “improve next year as higher oil prices push up currencies and thus consumers’ purchasing power in emerging markets, and spur appetite for more fuel-efficient vehicles.”

Meanwhile, there was no word from Zuchowski on his plans, and Hyundai did not elaborate publicly on its decision.

“We appreciate Dave’s decade of service to Hyundai, especially his leadership as president and CEO, which has made us a stronger organization,” Flannery, who will remain responsible for all legal matters in the U.S., says in a statement that attributes Zuchowski’s “leaving the company” to “a continuation of a reorganization that began late this year.” 

But apparently Hyundai has not been playing up to its capabilities under his stewardship: “I look forward to working closely with our dealers, affiliates, senior management and our talented and hard-working employees across the country to realize Hyundai’s full potential,” says Flannery, who was an attorney for Ford before joining Hyundai Motor America “in its infancy in 1987.”

Now in its adolescence, Hyundai is finding a bit difficult to fit in with the popular kids.

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