Chicago Auto Show MAMA
Breakfast Krafcik speech
2009 Chicago Auto Show
John Krafcik:
Thank you. This truly is one of my favorite auto shows.
I'd like to thank Jim and Jerry for putting together another great event this year, and I
am honored to be here.
Apart from the usually freezing temperatures here in Chicago in February, there's really
no place I would rather be.
I know the rich history of the MAMA breakfast, and I've sat in the audience with you on
many occasions listening to the inspirational and esteemed executives who have
spoken here in the past.
It certainly is an enormous honor to follow in their footsteps kicking off this show, and I
can only hope I don't tarnish the legacy you've built.
((INTRODUCTION))
Let me start my short comments today with a pair of quotes from two great Americans.
Thomas Jefferson said, famously, a long time ago:
“A government big enough to give you everything you want, is strong enough to take
everything you have.”
And Anne Morrow Lindbergh, Charles Lindbergh's wife and a prolific writer, left us with
this:
“Only in growth, reform, and change, paradoxically enough, is true security to be
found.”
Let's put these two quotes on the shelf, like bookends, and explore how they offer
guidance and wisdom to us in this most tumultuous of times.
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Crisis often breeds upheaval.
Throughout history, we see examples of revolutionary change that follows periods of
political, social, and economic uncertainty.
Sometimes these revolutions are marked by obvious and definitive chapters that are as
clear to those in the moment as they are to readers of history books:
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The bloodshed in the streets of Paris that defined the French Revolution.
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The rise of the Third Reich in Germany
·
The fall of the Berlin Wall signaling the end of the Soviet Union.
But sometimes, revolutions are less obvious to spot, in the moment.
For example, it's difficult to put a finger on exactly when China moved from a purely
Communist country, to an energetic proponent of a new form of capitalism, but it's clear
that that movement was a revolutionary change.
And I wonder if, in similar fashion, the changes sweeping across our nation will, with
the benefit of hindsight, be considered revolutionary by the historians of tomorrow.
I believe a strong case can be made that there is a new revolution taking place in our
country.
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A political revolution is sweeping through the White House, the halls of Congress
and in state and local governments.
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An economic revolution is brewing in response to our sagging national economy.
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And a cultural revolution is changing attitudes toward spending, credit and income
disparities.
This revolution offers a tremendous opportunity for the global economy, this nation, and
our industry.
So forget about the question being asked in editorial offices, whispered in Washington,
and debated in bars and restaurants – is this a recession, or are we in a depression?
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The answer to that question doesn't matter nearly as much as acceptance of this reality
– that there is a revolution taking place, right now, in this country, and around the world.
((GREED IS NO LONGER GOOD))
Like many of you, I began my career in this industry in the 1980s.
It was an era frequently characterized as the “decade of greed.”
This notion has been reinforced through popular culture – from Michael Lewis' book
“Liar's Poker” –
to fictionalized bond trader and self-described “Master of the Universe” Sherman
McCoy in Thomas Wolfe's “Bonfire of the Vanities” –
to Gordon Gecko's infamous “Greed is good” speech in the iconic movie Wall Street.
The truth is, the decade of greed didn't end in the 80s.
The junk bond and S&L scandals of the 80s were followed by the Internet bubble of the
90s, which gave way to the mortgage-backed-securitiesgenerated crisis we face today.
((Pause))
It turns out the decade of greed has lasted 28 years…
and has left Wall Street consumed in its own Bonfire of Vanities.
One thing seems fairly certain – as 2009 unfolds, the era of greed may finally be at a
close.
The current global economic crisis has paved the way for significant change.
This change has already taken on a revolutionary nature.
It involves a new government in the U.S. with new policies and new agendas.
It challenges the ever-widening gap between the haves and have-nots by calling for a
more equitable distribution of income.
It brands skyrocketing executive compensation as “shameful.”
It brings with it a sea-change in consumer behavior, with conspicuous consumption
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becoming more susceptible to criticism, and increasingly unaffordable.
((WHAT DOES THIS MEAN FOR THE AUTO INDUSTRY?))
So what exactly does this mean for the auto industry?
How can we survive, and ultimately prosper, in revolutionary times?
Let's face it, the burden on our industry is especially great – particularly in this country.
And while no other industrial sector has a greater impact on the health of our economy,
there is no other business with a bigger perception problem.
Let's face it – our reputation as an industry is horrible.
In the U.S., we are viewed for the most part as a slow, dim-witted industry that is
typically unresponsive to consumer and environmental needs.
If that weren't bad enough, our executives are criticized for lavish compensation,
abundant perks and unnecessary entitlements.
Our retail partners and their sales force have an immense image problem with their
consumer base.
Thanks in great part to manufacturer programs that put more focus on moving the iron
than consistently delighting our customers, we have reached the point where, frankly,
Americans would rather go to the dentist than visit a car dealer.
Getting a cavity filled shouldn't be more palatable than setting foot in a car dealership.
For the most part, our industry has a history of opposing environmental and safety
legislation –
sometimes with the force of science and good sense behind us, such as the early
California EV mandate, but other times with a much weaker platform of defense.
Many Americans believe that our fighting these issues is done strictly for own best
interests, which run contrary to those of our country's, and our society's.
As a result, we are painted with a broad brush as bad guys who care little about our
own customers and the world we live in.
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Add to this the fact that we consistently damage our own brand reputations by resorting
to costly discounts, rebates, and desperate sales tactics to keep our plants running and
to cover our fixed costs.
No wonder our industry is viewed with contempt.
((OWNING UP TO OUR SHORTCOMINGS))
In light of these considerable obstacles, the real question is – what can we do?
How can we change these serious misconceptions about our industry?
One idea is for us all to admit that there's actually a large dose of truth in many of them.
Part of today's revolution is about accountability.
If the President of the United States can admit he screwed up on some of his cabinet
nominations, then we shouldn't be bashful in acknowledging that we have been far from
perfect in our actions.
Beyond such acknowledgement, we need to work more consistently as an industry to
change those negative perceptions.
By taking personal responsibility for our shortcomings, rather than ignoring them, we
gain back our credibility.
I believe that in standing up and declaring ourselves accountable for the quality of our
products, our sales tactics, our commitment to customers and the environment, we can
bring this great industry back to the esteemed position it deserves.
((REVOLUTIONARY THINKING))
Turning our industry around will require some revolutionary thinking.
First and foremost, we need to build the highest quality vehicles possible, and in doing
so, prove that we listen to our customers and respond to their needs.
Our cars should be gorgeous.
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They must be rewarding to drive.
And the care we put into designing the car should be clearly reflected in the
workmanship the consumer perceives inside of it.
Skimping on quality to hit a cost target is a mistake, in my opinion.
Any car company can hit a cost target and deliver a terrible vehicle – there is no skill in
doing that.
We'd all be better off as an industry if every manufacturer missed every cost target on
every new vehicle launch by $100.
If we each took that money and sunk it into terrific interiors with soft touch points and
great vehicle dynamics, I promise you, we'd all get that money back through customer
satisfaction, loyalty and goodwill.
Right now, we actually aren't our own biggest competitors.
No, our biggest competitors are the used cars sitting in our customers' driveways.
We need to give people a real reason to buy a new car, and the best way to do that is
to put more irresistible new vehicles in our dealer showrooms.
((EMBRACING FUEL EFFICIENCY))
Another revolutionary step we can take is to embrace improved fuel economy as an
indisputable social good.
There's really no point in arguing about the veracity of climate change when you stop to
consider the finite supply of oil, and the turmoil that our present consumption habit is
fueling in the Middle East.
It's abundantly clear that improved fuel economy makes sense for our industry and for
our country.
In this regard, we've taken significant steps at Hyundai to move forward as an
environmental leader.
At last year's Auto Show in Los Angeles, we unveiled our Hyundai Blue Drive strategy,
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which aims to make us the most fuel efficient car company in the U.S.
We've pledged to achieve a fleet average of 35 miles per gallon by 2015 – a full five
years ahead of NHTSA's original deadline.
A bold position perhaps, but we were honestly surprised to be alone amongst all
automakers in taking a position like this one.
Going forward, we'd love to have some company here.
As an industry, we need to take a longer term view of our environmental strategies.
That means stepping up and getting ahead of the regulators where that makes sense.
We think that time is now.
((TAKING A MORE DISCIPLINED APPROACH TO OUR BUSINESS))
Executive salaries are certainly a hot button issue these days.
In fact, since we wrote the first draft of this speech a few weeks ago, executive
compensation has taken on a life of it's own.
There's even a new benchmark salary cap in play for companies on government
assistance.
While this may still be a touchy subject for some, it also represents an opportunity for
revolutionary thinking.
What if our industry was the first to exercise a more inclusive form of capitalism that
voluntarily restrained executive compensation to a reasonable multiple of average
employee salary?
And what if our industry adopted a uniform code of conduct regarding gifts, meals, and
business entertainment?
One major automaker has already taken this step, putting in place a crystal-clear policy
that stands as a model for the industry.
Employees of this company may not accept gifts, meals, or gratuities of any kind from
anyone – be they suppliers, dealers, partners, or prospects.
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It's time we exercised more discipline and more sensitivity in our approach to business.
It's time to say good-bye to the days of over-indulgence in auto shows, media launches,
gift-giving, employee and dealer rewards, and executive compensation.
There's a better way, a more modest and humble approach, that will help us move
forward together through these revolutionary times.
((SAFETY SHOULD NOT BE OPTIONAL))
While I think this fact is often taken for granted, we should never forget that we provide
one of society's most cherished freedoms – personal mobility.
With this comes the extraordinary responsibility to assure the safety of our vehicles.
And as an industry, this is an area we can be justifiably proud.
Some of our safety innovations have come as a result of consumer demand, but more
often we have introduced them because we knew it was the right thing to do.
For example, we're now championing life-saving technologies such as Electronic
Stability Control and installing this advanced technology ahead of federal mandates.
At Hyundai, we are strong believers in the power of ESC, and have been well ahead of
the government requirement to make this standard technology in every vehicle.
Obviously, when it comes to safety we can always do more –
every vehicle can always be made safer.
It's an endless challenge, and perhaps our most worthy one.
Volvo has long been a leader in this arena, setting the bar high for the rest of the
industry.
They have embraced safety as a rallying cry for their entire company, more recently
with a bold public proclamation to achieve zero occupant fatalities by 2020.
This is the kind of visionary thinking that can change perceptions of our industry.
Imagine the public benefit, not to mention the goodwill, that we could generate if we
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made this an industry-wide goal.
Again, a bold position to take…
but isn't the risk of not taking it even greater?
((CONCLUSION ))
The ultimate lesson that we as an industry must learn is how to better stand on our own
two feet.
We cannot count on elected officials and policy-makers to determine what is best for
our industry – nor do any of us want them to.
We need to find solutions on our own.
And by doing it ourselves we'll undoubtedly be stronger for it.
We need to forge partnerships in the private sector that help us through challenging
times like these.
And we'll need to think unconventionally.
Take for example the Hyundai Assurance program that we launched in January.
This program gets to the root cause of today's economic uncertainty – consumer fear of
job loss.
With the Assurance Program, we've mitigated much of the negative impact that fear-ofjob-loss has on automotive sales.
We worked together with a partner company outside of our industry, a company called
EFG, to bring this program to market.
The Assurance Program did not require government support.
But it has delivered benefits to all stakeholders, and to society.
Hyundai has benefited through increased consumer interest, showroom traffic, and
market share.
EFG has benefited through incremental revenue and profit.
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And consumers have clearly benefited – for they can now buy a car in a period of
economic uncertainty without worrying about what unexpected job loss might do to their
credit rating.
This is how private enterprise should work.
Somewhere, Thomas Jefferson is smiling.
It's clear that we need to be innovative in our response to these revolutionary times.
Innovative design.
Ingenious engineering solutions for the challenges of safety and energy efficiency.
And, importantly, innovation in the spirit in which we do business in this tough economic
climate.
We've taken one step forward with our Hyundai Assurance program, and we know
many of you are working diligently on similar programs that address the economic
realities facing consumers today.
Like every revolution before this one, bold leadership and courage of conviction will be
required to make the changes necessary to survive and prosper.
And so we come back to the words of Anne Morrow Lindbergh:
“Only in growth, reform, and change, paradoxically enough, is true security to be
found.”
I am confident that our industry has a tremendous appetite for “growth, reform, and
change,”
and that embracing this change during revolutionary times such as these, will help us to
not only survive, but to usher in the next era of greatness in the global auto industry.
It will be a different industry than it was in the past – it has to be.
The lines between domestic and import will become increasingly blurred.
We will exercise more sensitivity, more discipline, and be more inclusive, in all aspects
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of our business.
We will increasingly lead government regulators on key matters of safety, energy
efficiency, and the environment.
And we will achieve a new level of innovation across our enterprises, as we better learn
to better prioritize what is most critically important to our customers.
I am excited about this change, and excited to be playing at least a small role in driving
some of it.
I can't wait to see how our revolutionary thinking will manifest itself, and how we will reestablish our industry as the crown jewel of the global economy.
It's time to take notice – the world has changed.
Revolution is here.
And now . . . right now . . .is our time to change.
Thank you.
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