Hyundai Because of the Poor Quality of Its Cars, Hyundai Watched

question 11

Multiple Choice

Hyundai
Because of the poor quality of its cars, Hyundai watched its U.S. sales drop from 264,000 cars to 90,000 cars in just two years. Hyundai cars ranked 26th out of 35 car brands in terms of initial car quality as measured by the influential J. D. Power Initial Car Quality survey. With $6.6 billion in debt, a $1 billion investment for a new manufacturing plant in Alabama, and the company's first­ever loss, Hyundai's new chairman, Chung Mong Koo, declared that improving quality was the only way to fix the company.
The challenge for Chung was to get his managers to put quality, not costs, first. So he sent a visible, meaningful message that poor quality would no longer be tolerated. During one plant visit, Chung demanded to see under the hood of a car on the production line. He was furious when he saw loose wires, tangled hoses, bolts painted four different colors-a tremendous deviation from what the engine compartment was supposed to look like. On the spot, he instructed the plant chief to paint all bolts and screws black and ordered workers not to release any car unless all was orderly under the hood. He then publicly declared that Hyundai would produce higher quality cars than Toyota, and that its cars would lead the industry in quality.
Today, each workweek starts with a demanding three-hour meeting attended by managers, engineers, designers, and suppliers. In his large boardroom, Chung displays Hyundai cars on rotating turntables or mechanical lifts, whatever is required for those in attendance to see up close what problems need to be fixed. Hyundai managers now measure everything. Hundreds of charts on the walls of every Hyundai factory measure the number of times and the degree to which a process has produced parts that differ meaningfully from the quality standards for those parts. The quality department at Hyundai has grown from 100 to 1,000 people, all of whom now report directly to CEO Chung.
All employees share their ideas about how to improve quality because Chung communicated to workers that their ideas were important and welcomed. To prove it, he rewarded them with bonuses averaging $150 per employee. At one Hyundai factory, workers have suggested 25,000 ideas for improving quality, 30 percent of which have been implemented in the factory. For instance, a worker noticed that the Hyundai Sonata and XG350 (now sold as the Azera) had identically sized spare tires but different-sized spare tire covers. Though it sounds trivial, using the same spare tire cover for both cars saves Hyundai $100,000 a year.
Hyundai addresses customer complaints as quickly as possible, and these quick responses have had dramatic results. For example, Hyundai Santa Fe's score in J.D. Power's Initial Car Quality survey dropped from 149 problems per 100 cars (PP100) to 93 PP100 in just one year.
Finally, if the greatly improved quality isn't enough to convince you to buy a Hyundai, the company believes that its
10-year/100,000 mile warranty may be enough. The longest, most comprehensive warranty in the auto industry shows the confidence the company has in its cars. And those extensive warranties probably won't cost Hyundai much either, as the improved quality of its cars has cut the cost of warranty repairs, which are paid for by headquarters, by 35 percent over the last three years.
-Refer to Hyundai. A worker noticed that the Hyundai Sonata and XG 350 sedans had identically sized spare tires but different sized spare tire covers. Using the same spare tire cover for both cars saves Hyundai $100,000 a year and increased the company's productivity by_______ .

• A) decreasing confusion
• B) getting the same output for fewer inputs
• C) increasing inventory of only one item
• D) getting more inputs for more outputs
• E) decreasing variation

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Definitions:

Gasoline Consumption

The total quantity of gasoline used by consumers, usually measured in gallons or liters, over a specific period.

Air Pollution

The presence of toxic chemicals or compounds in the air, at levels that pose a health risk to humans and the environment.

Mixed Economy

A mixed economy that integrates both private sector and government involvement.

Government Failure

The occurrence when government actions lead to outcomes that are inefficient or not beneficial to society, contrary to its intended outcomes.