Executive Vice President Hyun Soon Lee heads Hyundai's Namyang R&D Center, Mabook R&D Center, and Advanced Research Group. Hyundai's integration of Kia is bearing fruits. This is the Kia Visto, a mini car based on the parent company's Atoz.

Prior to the integration with Kia, the Research and Development Division had 4100 engineers, designers, and staff in 87 functions and in 15 groups. The integrated Hyundai now has three operating companies, each headed by its own president.

An engineering graduate from the Seoul National University in 1973, Hyun Soon Lee studied at New York State University, where he obtained an MS degree and doctorate. He joined General Motors at the Technical Center in Warren, MI, and was involved in powertrain design. Hyundai was then an upstart auto company, although it was a new arm of the powerful industrial conglomerate, whose technology was largely Japanese, Mitsubishi to be specific.

The incumbent chairman was anxious to have his own engine, designed and developed by Hyundai's engineering team, and he wanted a Korean to lead the project. The chairman invited Lee to join the company.

"For me, it was a tremendous challenge, and I accepted it. I was the chief designer of our first engine, the Alpha inline four-cylinder unit, which has powered over 2.5 million vehicles and is still our mainstream engine.

"Since then, our team has produced three more engines of our own design. We now have a good mix of engines from the Upsilon 800-cm³ I4 for our mini car to the new all alloy Delta V6. Four engines covering a wide range of products. Not bad for 15 years work, wouldn't you say," Lee asked.

When he joined Hyundai in 1984, it was the youngest auto company in Korea with an annual production falling short of 100,000 units. "I calculated the economy of developing our own technology, for example our own engines. It was not really saving money. In fact, our volume would not justify such a huge investment," he said. Hyundai had ambitious plans for growth. It had already started planning to export its cars to the lucrative North America. "We decided to invest. Is Hyundai of today aiming at being a self-sufficient manufacturer? Is it the way of the world's major manufacturers to survive in the competitive and socially conscious environment? We must have our own basic, fundamental technology, especially powertrain," Lee explained. That philosophy prompted his team to develop Korea's first all alloy, quad-cam V6, the Delta engine, and an electronically controlled, adaptive four-speed automatic transmission to be combined with it.

Director Akira Kijima of Mitsubishi, Hyundai's former mentor, supplier, and now partner in joint projects, praises Lee's achievements saying "we haven't gotten around to an aluminum V6 block!"

Hyundai hardly suffers from die-hard "it's-all-created-here" syndrome. The Hyundai Equus, a grandiose executive sedan, is a case in point. The front- wheel-drive car was jointly developed with Mitsubishi, employing the latter's GDI (gasoline direct-injection) technology on its quad-cam, 32-valve, 4.5 L V8 engine mated to a brand new adaptive five-speed automatic. A twin model will be produced and introduced in Japan later, built with a Hyundai-supplied body shell as was done with its previous collaborative efforts, the Hyundai Grandeur/Mitsubishi Debonair twins. More Grandeurs and more luxurious Dynasties are sold than Debonairs, thus the economy of body tooling in Korea.

On the other hand, Mitsubishi supplies key engine components to Hyundai, which assembles the GDI V8 for its use. Why GDI complexity for a large-displacement V8 in a top executive car, which is invariably owned by a large corporation (or a government ministry) that can certainly afford the fuel bills? Mitsubishi believes it is by far the most important internal combustion technology for them to soar into the new millennium. "Hyundai, and Lee in particular, wholeheartedly embraced the concept," said Kijima, adding, "Of course, he is a most astute engineering partner and only expects the best of this executive car and powertrain."

Lee elaborated, "Yes, we must have the basic, fundamental technology base; however, when we do a fuel cell vehicle, for example, we would not develop our own fuel cell stack if there is already an advanced and reliable system on the market. We would go ahead and buy it. We are more open to that sort of advanced technology in an outside world than are many of our competitors." Hyundai is going through a major transitional period, integrating Kia in the bigger scheme of things. Hyundai's strategy is to let Kia remain its own brand. So not all models are to be badge-engineered. Of the two former competitors' cultural differences, Hyundai is still a relatively young company, having just seen its 30th anniversary late last year.

"Hyundai is progressive and agressive, eager to extend and expand globally. We are very R&D oriented. We are willing to take a risk if there is a chance of success," said Lee. "Kia is much older, in fact, a pioneer of the Korean automobile industry. As such, they may be a bit more conservative. We insist on our own core technology such as powertrain, but Kia still buys some of their engines. Maybe that is the difference between our cultures," observed Lee.

Integration of the two companies' R&D functions has begun with their respective advance research activities. I have been in charge of Hyundai's powertrain development. We are developing our new generation of engines, transmissions, and alternative power units, such as hybrid IC/electric ones," Lee said. "When I visited Kia's central laboratory, they were doing the same things, combustion research, emission control technology, alternative fuel powertrain. You name it, they were working on it. So immediately I proposed we should pull our resources together and combine our efforts. The advance research groups were the first to be integrated, resulting in a huge saving in material and human resources."

Lee said it was a reasonable and relatively painless approach: "We didn't have to worry about product launch timing and other earthly considerations, because the areas were for future. Actually, there was one product that benefited from our combined efforts, a navigation guide system, which both we and Kia had been working on, for the same purpose and commercial application. There are so many things we can combine and share."

Following the advanced research groups were the styling departments, which have been integrated. The third will be powertrain, engines, and transmissions. "Kia imports its automatic transmissions from Japan," Lee said "Hyundai has an extra capacity, therefore, it is an immediate consideration. Likewise, we can share engines. For example, Kia does not have its own large displacement (around 3.0 L) V6s, and again they are relying on an outside source. We have V6s," said Lee. "And then diesels for heavy trucks. Volume for this type of vehicle is limited to 20,000 units a year when the economic climate is favorable. We are using different engines for vehicles in the same segment, at greater initial costs, parts supply and services. This could be trimmed down, relatively painlessly."

Lee's team is now in the process of evaluating all engines and transmissions of the two groups, and their respective cost factors. Another question was posed to Lee. Hyundai's assembly lines must be designed to build its unique platform-based vehicles, and Kia's facilities geared to produce its own, which are largely based on Mazda designs. Wouldn't it incur huge expenditures to adapt one assembly line to vehicles conceived and designed elsewhere? "That's true," Lee said. "We are tying to figure out ways to choose a better solution of the two options. Trying to fit a different design to an assembly line is expensive. On the other hand, keeping two platforms for cars in the same category is also costly. We must compare and see which one is more cost-efficient for the company. First, we must determine which platform has better product attributes and favorable cost factors for a specific product line. That study will be completed by the middle of 1999. Then we will make final decisions. We are moving fast, but it is a time-consuming business. It may take a minimum of five years, or longer before we can fully integrate our operations."

The Korean automobile industry's Achilles' heel is its component suppliers, who are far behind in their R&D capabilities. No major foreign powers have capital participation in the Korean automakers, after Ford aborted its attempt to buy Kia, whereupon the Ford-Mazda combination sold off most of its holdings in the Korean company. However, mega- and major-global suppliers are more active in Korea. Delphi has a prominent presence. Hyundai has recently sold its seat-building operation to Lear.