From NUMMI to MIT to Ford to Hyundai: John Krafcik

Gary S. Vasilash

The man who helped define “lean” is now helping Hyundai gain ground in the U.S. market by heading up the company’s Corporate Planning Div.

John Krafcik probably knows as much about lean production as anyone in the industry today, at least outside of the Toyota organization. In fact, Krafcik is that man who, when working with James P. Womack and others on the International Motor Vehicle Program at MIT (where Krafcik received his M.S. in Management, from the Sloan School in 1988), helped coin the phrase “lean manufacturing,” which became essentially immortalized in The Machine That Changed the World (1990). Krafcik, who received a mechanical engineering degree from Stanford in ‘83, had become an expert on assembly plants (he and then-MIT colleague John Paul MacDuffie led round one of the International Assembly Plant study, a key enabler of the venerable book on lean).

As he recalls, his analysis of 37 assembly plants (his thesis was titled “Comparative analysis of performance indicators at world auto assembly plants”) led him to recognize what he calls a “fragile production system.” He explains that in a “fragile” system, wherein things like inventories are exceedingly limited, wherein things could “break” rather easily, the need to have strength within that fragile system is critical. He witnessed the Toyota Production System (TPS) and realized that it was a clear differentiator. Having inside appreciation of TPS—Krafcik was the first American engineer hired by New United Motor Manufacturing, Inc. (NUMMI), the Toyota-GM joint venture in Fremont, California; he worked there between Stanford and MIT—made him all the more cognizant of the power of fragile production. He says that he’d had the opportunity while employed at NUMMI to visit (and work at) the Toyota Takaoka Assembly Plant (where Corollas and other cars are built) and then the GM Oklahoma City Assembly Plant (which at the time was building the A-body platform, such as the Olds Ciera) and that this had “set up his thought process” as regards efficiency in production. His experiences at NUMMI essentially led him to MIT. . .and to the concept of “lean.”

While he recognized the impor-tance of organization and culture to creating efficiencies in manufacturing, he also recognized that design accounts for about a third of the productivity and quality that can be achieved. Krafcik has an abiding interest in product development, in which design plays a signal part.

In 1990, Krafcik joined the Ford Motor Co. Despite having no product development experience, he gained it during his 14 years at Ford, during which time he held a number of positions, including that of being chief engineer for the Ford Expedition and Lincoln Navigator (from ‘98-’02). He describes the chief engineer position on a vehicle as being “very rewarding.” His last position at Ford was as chief engineer for Truck Chassis Engineering, which gave him intimate involvement with the F-150 program.

His interest, however, in wider aspects of product development was abiding. In April 2004, Krafcik left Ford and joined Hyundai Motor America (HMA; Fountain Valley, CA), as vice president, Corporate Planning Div. This, he says, gets him involved with product, brand, and strategic planning; research, and even pricing for the vehicles. This is an exceedingly active time at Hyundai, which is undertaking what’s being called a “24/7” program, in that it is in the process of launching seven vehicles in 24 months, the first of which is the Tucson small SUV*. Given the fact that Hyundai tied with Honda for second place in the 2004 J.D. Power & Associates Initial Quality Study (IQS) and its Sonata placed first in the Entry Midsize Sedan segment of the IQS. When announcing the ‘04 IQS results, Joe Ivers, partner and executive director of quality/customer satisfaction at J.D. Power & Associates, stated, “A decade ago, as Korean manufacturers struggled with a universally poor reputation for vehicle quality, no one would have predicted they could not only keep pace, but actually pass Domestics and other imports in terms of initial quality.” Hyundai is the number-4 import brand in terms of sales (way behind Toyota and Honda; closer to Nissan); it rates number-two in consumer loyalty. According to Bob Cosmai, president and CEO of HMA, the corporate goal is to reach the global top five in terms of production and sales by the end of the decade.

Krafcik says that during his world-wide assembly plant research in the ‘80s he visited Hyundai in Korea. Years after the visit, he checked his notes and saw that he’d written that Hyundai had the makings of a strong automotive competitor. The young researcher was apparently prescient.

Next year, Hyundai Motor Manufacturing Alabama will begin production in a two-million-ft2 facility in Montgomery. In addition to assembly of the Sonata sedan and the Santa Fe SUV—which Krafcik describes as “an unusual pairing”—there is also an integrated engine plant on the site. Planned capacity is 300,000 units per year. “We will maintain our low-cost producer position,” Krafcik states. And they’ll be no less relenting on quality, he insists. “One of the things that attracted me to Hyundai is its craftsmanship and quality,” he says.

Before moving from Michigan back to California to take the job with Hyundai, Krafcik says that he went to Hyundai of Ann Arbor and test drove the Sonata, Santa Fe, and Tiburon. He wanted to get his own sense of the vehicles. So when asked how he wants the general consumer to perceive the company’s products, he says as “a smart purchase,” based on the specification, quality, and price. What is his biggest challenge? While he says there are many, one of the primary concerns is with pricing and incentive strategies. And, of course, “shaping the ideal product portfolio.” After all, he is a product development guy at heart.

*In addition to which: ‘06 Sonata, spring ‘05 (first vehicle in to be built in the Hyundai Motor Manufacturing Alabama plant); Accent in fall ‘05, next generation Santa Fe in early ‘06, new van spring ‘06, and a new Elantra in fall ‘06.


Tucson: Overachiever

Hyundai has added a compact SUV to its lineup, one that it says competes with the Ford Escape, Toyota RAV4, and Honda CR-V. What’s notable about the vehicle is that it indicates the kind of overachievement Hyundai is using to compete in the market. That is, take the dimensions. Its wheelbase, 103.5 in., is greater than the vehicles in the competitive set. Its length, 170.3 in., is less than that of the Escape (174.9 in.) and CR-V (178.6 in.), but its height (68.1 in.) tops all but the Escape (69.7 in.) and its width, 70.7 in., is more than the others. Its weight, 3,240 lb., is less than all but the RAV4 (2,943 lb.). The point here, of course, is that dimensionally, the vehicle is speced to be at or near the top of the class. 

But it is in the details and amenities that the vehicle really comes to the fore. When walking around the car with John Krafcik, Hyundai Motor America (HMA) vp, Product Planning & Strategic Planning, he points out small details like the seams of the headliner and trim in the rear cargo area and he says that it is the kind of thing that he had previously been told was nearly impossible to achieve for a mass production vehicle. He credits both the high levels of computer-aided engineering deployed at the Namyang Research Center in South Korea and the level of hard work and craftsmanship of the company’s workers. He points out that while some people think that the wage rates in South Korea permit the company to build vehicles that have a low price, the wages paid are actually higher there than they are for people who work in Mexican assembly plants.

The base Tucson is equipped with a 140-hp 2.0-liter, DOHC four with continuously variable valve timing and a five-speed manual. On the two higher trim levels, there is a 173-hp 2.7-liter V6 that’s mated to a four-speed automatic with sport shift capability. Either engine can be equipped with a Borg Warner Electronic InterActive Torque Management four-wheel-drive system that can do a 50:50 front-to-rear split if necessary. The Tucson has four-wheel discs and ABS with electronic brake distribution. Another interesting standard feature: electronic stability program (ESP, a.k.a., ESC), which is remarkable on a vehicle that has a starting price of $17,499, as are the six airbags. Bob Cosmai, HMA president & CEO describes it as being “value-packed,” which is something of an understatement. The vehicle has four-wheel independent suspension. The use of a four-ring body structure not only makes the vehicle feel solid, but certainly contributes to its level of safety.