Hyundai Chief Technology Officer Quits Over Quality Issues

Hyundai Motor Co. (005380)’s chief technology officer resigned after record recalls this year threatened to undermine the South Korean automaker’s reputation for reliability.

Kwon Moon Sik, who was president of the research and development division, quit yesterday along with two other executives, the Seoul-based company said in an e-mailed statement today. It didn’t say who will replace Kwon.

The resignations follow a series of recalls this year by Hyundai and its affiliate Kia Motors Corp. (000270), including more than 1.7 million vehicles in the U.S. for malfunctioning stop-lamp switches. The defects are a blow to Hyundai, which has striven for years to upgrade its image as a maker of cheap utilitarian cars, and follow a rapid expansion of production in new markets such as Brazil and China as it competes with Toyota Motor Corp.

“Hyundai is probably trying to refresh the atmosphere before the launch of its new models to show it cares about its quality,” said Lee Sang Hyun, an analyst at NH Investment & Securities Co. “Hyundai has seen how poor quality control has hurt business at Toyota and other automakers and will try to avoid being the center of such attention at all costs.”

Hyundai rose 0.6 percent to 249,000 won at the close in Seoul trading, while the Kospi index gained 0.9 percent.

Photographer: SeongJoon Cho/Bloomberg

The Hyundai Motor Co. logo is displayed at one of the company's dealerships in Seoul. Close

The Hyundai Motor Co. logo is displayed at one of the company's dealerships in Seoul.

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Photographer: SeongJoon Cho/Bloomberg

The Hyundai Motor Co. logo is displayed at one of the company's dealerships in Seoul.

Record Recall

The U.S. recall was related to stop-lamp switches that may malfunction and cause brake lights to not illuminate, the cruise control to not turn off and other faults that could raise the risk of a crash, according to filings posted on the National Highway Traffic Safety Administration’s website.

The company expanded the recall to Genesis sedans, made between December 2007 and March 2012, on a faulty brake system, according to an e-mailed statement from South Korea’s transport ministry last month.

Hyundai set aside 90 billion won ($84 million) in the first quarter this year to manage the recalls in the U.S. on the electronic defects, Lee Won Hee, chief financial officer, said in April.

Once known as the builder of cheap, utilitarian urban cars like the $4,995 Excel subcompact, Hyundai has emerged as an industry contender, making vehicles in eight countries with a 2013 lineup that includes the $14,545 Accent and the $61,000 Equus premium sedan. Together with Kia, it was the world’s fifth largest automaker by number of vehicles sold, according to data compiled by Bloomberg.

Matching Toyota

Chairman Chung Mong Koo, whose father built postwar Korea’s bridges and expressways, has focused on enhancing the quality of his cars since taking over the company in 1998, insisting that the vehicles would match the quality of Toyota. He backed that claim with a 10-year engine warranty in the U.S.

Photographer: SeongJoon Cho/Bloomberg

A man using a mobile phone walks past a Hyundai Motor Co. 5G Grandeur sedan on display in the showroom at the company's headquarters in Seoul. Close

A man using a mobile phone walks past a Hyundai Motor Co. 5G Grandeur sedan on display... Read More

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Photographer: SeongJoon Cho/Bloomberg

A man using a mobile phone walks past a Hyundai Motor Co. 5G Grandeur sedan on display in the showroom at the company's headquarters in Seoul.

In January 2012, Hyundai’s Elantra compact won acclaim when Detroit automotive journalists named it North American Car of the Year. The Genesis sedan, the same vehicle that was recalled in South Korea this year, won the J.D. Power trophy for the highest initial quality in the midsize premium car segment in June.

Hyundai is preparing to introduce the new version of the Genesis later this month and the Sonata next year. The automaker is expressing its “strong will” to reinforce quality control, the company said.

“Chairman Chung is known to take action on quality issues and have those accountable take the responsibility,” said Lee at NH Investment. “There’s no doubt that this will lead to stricter quality control at the company.”

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Chua Kong Ho at kchua6@bloomberg.net

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