Hyundai exec's departure reveals tension over U.S.

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The sudden resignation of Dave Weber, Hyundai Motor America's VP-marketing, sheds light on the increased involvement of the automaker's South Korean parent in the U.S., which dealers fear could derail one of the industry's most stunning turnarounds.

Mr. Weber explained his Aug. 2 departure to select dealers in a letter, which a dealer read to Advertising Age. "In recent months, [Korea's] Hyundai Motor Co. management has been looking to take the company in new directions," Mr. Weber wrote. "These are directions with approaches that differ from my view."

Reached at home last week, Mr. Weber said only that his "differences of opinion were with the parent company and had nothing to do with Hyundai Motor America." He said there were "certain approaches and certain ways of doing business" he disagreed with, but did not elaborate.

Mr. Weber is the second marketing executive to leave Hyundai in recent weeks following the departure of Rick Weisenhan, marketing director at Hyundai's Kia Motors America unit.

In the U.S., Hyundai has continually denied that Korean management orchestrated the review late last year for the $340 million media buying and planning account of Hyundai and Kia. Aegis Group's Carat won the review last January. A second review for Hyundai's national creative business in April saw the business shift from Cordiant Communication Group's Bates USA West, Irvine, Calif., to independent Richards Group, Dallas.

Americans at Hyundai and its dealers call the Korean parent's influence the "K factor."

U.S. leads

But Jake Jang, a public relations manager at Hyundai in Korea, said that U.S. executives "run the company by themselves." They "always talk to headquarters here," he said, but added, "the main decisions are always made there."

Asked whether Korean managers have exerted more control in the U.S., Finbarr O'Neill, president-CEO of Hyundai Motor America, said, "I don't see it that way." But two dealers who asked not to be named said they fear a repeat of 1989, when Korean executives were dispatched to run Hyundai in the U.S. Sales fell and didn't improve until new management was installed in 1998. Mr. O'Neill said the problems then weren't due to Korean management. "There were a lot of other issues," mainly product, he said.

The marketer didn't invite Hyundai incumbent Bates to defend its media account. "There were some concerns about [Bates'] conflicts," Mr. O'Neill said. Bates, Hyundai's only U.S. media and creative agency since 1986, is credited with helping its recovery in recent years. But according to two dealers, Bates wasn't notified about the creative review until 15 minutes before a January meeting at which Hyundai told select dealers about it.

Carat went on to win all five regional dealer ad group media accounts, worth an estimated $200 million. Carat remains in negotiations with the groups over compensation issues, according to one dealer close to the matter.

chaebol power

Hyundai Motor is one of Korea's six biggest chaebols or conglomerates controlled by families that conduct inter-group trading. In recent weeks, the Korean government's anti-monopoly Fair Trade Commission requested internal documents from the six chaebols to check for illegal trading, according to The Korea Times.

It isn't unusual in Korea for a chaebol to use an in-house ad agency. In 1999, the Hyundai Business Group chaebol sold an 80% stake in its in-house shop Bates Worldwide-later renamed Bates' Diamond Ad in Korea-for $100 million and inked a five-year contract for Hyundai's auto account there.

There is speculation among those close to Hyundai that Korean management now wants to bring U.S. media in-house.

family struggle

Mong Koo Chung, the 60-plus-year-old son of late Hyundai founder Ju Yung Chung, is chairman of Hyundai Motor Co. He rose to the position in 2000 after a bitter public battle with Mong Hun, his younger brother. Chairman M.K. Chung is said in published reports to dislike Bates because Mong Hun got the 20% stake in Bates' Diamond Ad in their power struggle. "I don't want to get into that" issue, said Mr. Jang, the spokesman in Korea.

Chairman Chung's only son, E.S. Chung, is his heir apparent. E.S. Chung is CEO of the World Marketing Group, the recently-formed Irvine, Calif. limited partnership that is half-owned by the U.S. arms of Hyundai and Kia. "I wouldn't read anything into that fact," said Mr. O'Neill.

In May, Korean Kenny Han, chief marketing officer of WMG, said its main role was to audit and oversee Carat and its newly-consolidated media account. But WMG's role has changed, and that has caused friction with Hyundai and Kia, executives close to the matter said.

"We are basically the in-house media departments of Hyundai and Kia," Peter Smith, WMG's strategic planning manager, said last week. Carat's national media contract is with WMG, not Hyundai or Kia.

Hyundai CEO Mr. O'Neill admitted "there were confusing communications who was telling who what to do" in WMG's early days. "Carat was getting confused as well," he said. But he declined to describe WMG as the "in-house" media department for the brands.

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