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Destined to Drive

The head of Hyundai Motor America, John Krafcik, SM ’88, helped turn a once-derided brand into a powerhouse.

Like millions of other three-year-old boys in the 1960s, John ­Krafcik spent hours driving his Matchbox cars down imaginary carpet roads, plunging them off cliffs of pillows, and skidding them across vinyl floors into spectacular crashes. But unlike other boys, Krafcik says, he knew even then that he was destined to work in the auto industry. The interesting cars his older brothers brought home and the Car and Driver magazine that landed on the family doorstep every month kept him hooked. “All I’ve ever really wanted to do is design cars,” he says.

He got his wish in 2004 when he became vice president of product development and strategic planning for Hyundai Motor America, where he had enormous influence on the design of the models now in dealers’ showrooms. But these days, he has more to do with marketing and selling cars than designing them. Since Krafcik became president and CEO in 2008, Hyundai Motor America has increased its U.S. market share from 3 percent to more than 5 percent and has helped make Hyundai the fifth-largest automaker in the world. It also became the first automaker to meet the federally imposed fuel economy standard calling for new car fleets to average 35.5 miles per gallon by 2016; four of its models are now rated by the EPA at more than 40 miles per gallon for highway driving.

A company that was once the laughingstock of the auto industry, known for its poor quality and derivative designs, has become a major force, and now Krafcik’s concern is keeping complacency at bay. “Stay humble, stay hungry” is his mantra.

John Krafcik’s automotive career started in 1984, when GM and Toyota opened a joint venture in the San Francisco Bay Area. Then just a year out of Stanford, Krafcik was the first U.S. engineer hired to work at the plant where the auto giants manufactured cars for both brands. While there, he visited other GM and Toyota plants and began to understand the differences between traditional mass production and what would later come to be called lean auto production.

Two years later, Krafcik planned to follow one of his brothers to the Wharton School at Penn for an MBA, but he had also been accepted at MIT and decided to visit. “It was a dingy, gray Boston day,” he recalls now from his office in Southern California. “It looked like London during the Dickens era.” When his campus tour ended in the career placement center, he was certain Wharton was his future, but then he noticed a three-by-five index card on a corkboard: “Wanted—auto industry analyst. Call Jim Womack.” Krafcik made the call. Within a day he was the auto analyst for the International Motor Vehicle Program (IMVP) at MIT, and a few months later he started his master’s at Sloan.

For the next four years, Krafcik traveled the world, comparing 90 manufacturing plants in 20 countries according to their productivity and the final quality of their products. The data he collected became the heart of a book, The Machine that Changed the World. “The idea that a grad student was supervising the most important part of an international study and sitting down with leaders and CEOs was exceptional,” says engineering systems professor Dan Roos ‘60, SM ‘63, PhD ‘66, principal investigator of the IMVP and coauthor of the book with Womack.

The lure of designing cars continued to pull Krafcik, so next he convinced the powers at Ford to forget he was a manufacturing guy and hire him in an entry-level product development position. When he left to join Hyundai 14 years later, he was chief product engineer for the Ford Expedition and the Lincoln Navigator.

“I could sense it was an iconoclast,” he says of the Korean automaker. Hyundai had already improved its quality and started an aggressive campaign to overcome its lingering reputation for producing shoddy, unreliable vehicles. Krafcik knew he could help by designing cars that would be more appealing to American buyers.

When he arrived at Hyundai in 2004, the company had already introduced a 10-year, 100,000-mile warranty. That was a marketing tool, he admits, but it was also a clarifier for Hyundai engineers. The warranty, together with an imperative to fix any problem that appeared in a car within the model year, further improved Hyundai’s quality.

“The customer is the priority, not the process,” says Krafcik, “and if the customer or the market says we need to fix something, we do.” While most automakers freeze the design of a car as early as two years before production begins, Hyundai has been known to make changes, often based on feedback from customers who’ve tried prototypes, with mere months to go. Krafcik himself spends a considerable amount of time staying in touch with customers and dealers. He reviews all written complaints sent to his office—the few people who take the time to write are usually very unhappy—and interacts with customers by phone, e-mail, and Twitter.

“John can communicate on all levels,” says Scott Fink, chair of the 17-member Hyundai National Dealer Council and president of the second-largest U.S. Hyundai dealership. “He’s come to my dealership and engaged the techs, the service advisors, the salespeople. He’s looking for someone to tell him something he doesn’t know. If we offer suggestions to improve the product, he takes those to heart and works to accomplish them.”

Krafcik pushed Hyundai to aim for every car in its lineup to lead its market segment in both fuel efficiency and design. And when the fuel economy standard was set in 2007, originally requiring a fleet average of 35 miles per gallon by 2020, Hyundai was virtually the only company that didn’t believe Congress was asking too much. “We sent a letter and said: ‘We think we can do this, and we think we have a shot of getting there by 2015,’” says Krafcik.

In fact, Hyundai got there in 2011. The key to the automaker’s success was that it focused on perfecting existing technologies, such as direct-injection gas engines and advanced transmissions, instead of pinning its hopes on hybrids and electric vehicles. Krafcik also lobbied hard in Korea for Hyundai to be the first to drop the V-6 engine from its most popular midsize model. Replacing the V-6 in the Sonata, as well as in the Tucson, allowed design decisions that increased efficiency. Hyundai was the first automaker to commit to the goal of achieving a North American fleet average of 50 miles per gallon by 2025.

To meet the company’s design goal, ­Krafcik encouraged the Korean and U.S. corporate management to accept the sculptural design that first appeared in the 2011 Sonata, which—along with the Elantra and the Santa Fe—was designed in Southern California. “It was a very risky gamble going that far in the design,” he says. But the bet seems to have paid off: “About 75 percent of Sonata buyers in the 2011 model year were new to the brand. In the entire industry, no model has brought more new owners to a brand than Sonata.”

John Krafcik is a regular guy who for years drove an Accent—the entry-level car in the lineup. (In 2008, he upgraded to a Genesis.) He loves the energy of his company and the lean management team that means changes happen quickly—at “Hyundai speed,” as employees say. And he loves the way Hyundai supports research on childhood cancer: since 1998, Hyundai Motor America has given $43 million to the cause through its nonprofit Hope on Wheels. In 2011, it donated $10 million to Orange County Children’s Hospital to fund a genomic research institute for pediatric cancer.

Passionate though he is about cars, however, he wishes the industry would take the lead in improving safety and efficiency instead of relying on governments to set standards. “We shouldn’t wait to be regulated,” he says. “This is a crazy stretch target, but maybe no one has to die in an automobile. We don’t know how to get there, but I guarantee you that we would find extraordinary ways to reduce fatalities in cars. I know we could do it—if we could all just sign up for it.”

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