Hyundai: A Real Quality Success Story
Norman Taylor & Associates
May 5, 2011
For decades German engineering was the standard for premier quality products world wide. If you wanted a machine, whether a 10-ton lathe or miniature scientific test equipment, you bought German, if you could afford it. Those decades are over. Perhaps they will come back, time will tell.
If you look at sales numbers, the Germans are still selling lots of Mercedes, BMWs and other makes. This is proof of the strength of brand loyalty created over a very long time. But…there is a delay on the effect of brand value lost. After all, statistically an owner taking his new $60,000 vehicle in ten times to get the transmission or high pressure fuel pump repaired is but one wave in a storm of disappointment. So he contacts a lemon law attorney, it’s still just one case, right?
Enter another statistic. Over 40% of Norman Taylor & Associates California lemon law cases for 2010 were for German cars. Take a breath…extrapolate this fact nation wide. You can’t include any other part of the world because the U.S. is the only country on the planet that has serious lemon law consumer protection laws.
The German problem is a problem of quality. Some would call it a social problem, or a national problem, or getting parts from plants all over Europe and trying to control quality. It’s still a quality problem, it always has been.
The 20th century has seen two great manufacturing successes. Both were based almost entirely on the application of rigorous quality principals throughout the manufacturing processes. The push for quality excellence in both cases was driven from the top; this is to say the corporate directors, CEO and senior management, engineering, and production were fully behind changes they knew would take decades to accomplish. This takes extraordinary focus and intention.
The first example is post war Japan. In the fifties Japan had a reputation for shoddy products. By the sixties they were jumping to the fore front of quality in whole industries. Japanese quality was getting so good it became their watchword, it became the brand. Despite recent difficulties they are still the manufacturing powerhouse of Asia.
The second example is Korea. Like Japan in the fifties, they also had a reputation for producing low quality manufactured goods. Their real commitment to quality didn’t begin until 2001. Like Japan, Korea’s commitment had to come from the top and spread throughout their manufacturing structure.
For those of you who like statistics, the following numbers are illustrative of Hyundai’s success. J. D. Power is the premier automobile quality rating organization in the country, if not the world. In its annual “Initial Quality Study” it measures the number of reported problems per 100 vehicles in the 1st 90 days of ownership. In 2001 Hyundai was 32nd out of 37 manufacturers surveyed. This was not very good. In baseball speak they were practically in the cellar. In 2011 they are 10th out of 37 manufacturers surveyed. To continue the baseball metaphor, they are a contender for the playoffs.
Our interest at Norman Taylor & Associates is automobiles, light trucks, RV’s and motorcycles. Looking over our statistics, for numbers of lemon law cases per year, our charts dovetail nicely with J. D. Power’s quality surveys. The thing to remember is what sort of concentration of effort is required to achieve this kind of change. Think of the planning and persistence needed to continue past all difficulties, national and supranational: And it’s not ancient history, it’s happening right now.
With these examples in mind, is there anyone who doesn’t see a parallel in these examples when looking forward at Chinese manufacturing? At the moment they don’t have a very good reputation in many areas, but they learn fast. When Chinese automobiles and trucks hit the American market—thinking historically—it is a safe bet that we will see a steep rise in lemon law cases, but once they understand the quality equals success equation, who would doubt that they will succeed? Like Japan, they understand that planning based on the quarterly report—the western management method— simply will not work. It is a reactive technique. The stock goes up, who knows why? Everyone has a party, buys a new boat and forgets about quality. The stock goes down and management looks around for whom to fire.
Lest you think we at Norman Taylor & Associates have some connection with Hyundai except the Lemon Law, we do not! When they make a lemon car, and it is brought to us, we will do our job. It doesn’t happen as often though. A good question: Can Hyundai keep to the plan? We shall see.