Korean Chrome Heads for the U.S.

By John S. DeMott

World automakers do not rank among big league players until they sell their cars in the U.S., the world's richest auto showroom. Last week South Korea announced its bid for a place in that market. Executives of Hyundai Motor America, a subsidiary of South Korea's largest industrial conglomerate (est. 1984 sales: $10.3 billion), said that they will begin selling cars in the U.S. this fall.

Hyundai is nothing if not ambitious. Max Jamiesson, 51, a former Toyota official who is the new executive vice president of Hyundai Motor America, told participants at the convention of the National Automobile Dealers Assoc. in San Francisco that his goal is to sell 100,000 vehicles in the 1986 model year. That would be less than 1% of the total U.S. market of 10 million vehicles and 4% of all imports vs. about 18% for all Japanese makes. But it would be far more than the 288 cars that Toyota sold in America in 1958, its ) first full year in the U.S.

Hyundai (rhymes with Sunday) will offer U.S. buyers a front-wheel-drive subcompact and a rear-wheel-powered compact, both made in its modern factory on an 86-acre site in the port city of Ulsan. This year the plant's production capacity will be increased from 150,000 to 300,000 vehicles a year in anticipation of U.S. sales. Just what the subcompact will look like is known only to Hyundai officials, who have code named it the X car. It will be unveiled in March and is expected to sell for as little as $5,000. That would make it cheaper than the Japanese-made Suzuki (base price: $5,151), a mini sold by Chevrolet as the Sprint in nine Western states and the lowest-priced car in America. The larger car, the Stellar, will begin at $7,000. Hyundai intends to begin assaulting the American market in California, where the Japanese also started.

As a warmup for its American offensive, Hyundai last year introduced its Pony subcompact into Canada, anticipating sales of no more than 5,000 cars in the first year. Thanks largely to its attractive base price of just $4,600 (in U.S. dollars), Pony sales topped 25,000, or 11% of the Canadian import market.

No one in Detroit underestimates the new challenge. Says Ford Chairman Donald Petersen: "The Koreans are bound to be one more very unsettling dynamic in the worldwide car market." He believes the Japanese will export more up- scale models to the U.S. and leave the less expensive sector to Korea.

American auto-industry experts say that the biggest task facing the Koreans will be to manufacture cars that meet U.S. standards. Despite remarkable strides in the past few years, Korean automakers still lag behind Japan and the U.S. in quality production. The fits and finishes on Canada's Pony, for example, are below par. Says Chrysler Vice Chairman Gerald Greenwald: "They've got the will. The question is if they have the ability." Hyundai officials admit they have a long way to go. Said H.B. Suh, an executive at the plant in Ulsan: "We are still trying to improve our productivity, and our quality control is getting better."

Hyundai is only the first of several Korean companies that are eyeing the American market. Daewoo, a firm that is 50% owned by General Motors, hopes to be selling 80,000 cars in the U.S. in 1987. Kia, a Korean conglomerate, could link up with Ford, and Chrysler has held talks with Samsung, another firm with designs on the U.S. market. Maryann Keller, an auto-industry expert with Vilas-Fischer Assoc. in New York City, predicts that imports from such countries as South Korea, Taiwan, Mexico and Brazil will one day control the important U.S. market for the $5,000 car.

With reporting by Edwin M. Reingold/Tokyo and Paul A. Witteman/Detroit