So is Hyundai-Kia going to manufacture the Apple Car, or no?

Over the past month, the best clues came from tracking the wild swings in stock prices for Hyundai Motors and Kia. Up until last Thursday, traders were treating it as a done deal. Kia soared close to 60% from the end of 2020. Hyundai peaked over 50% higher.

Then on Friday morning both stocks stalled and fell slightly (about 1-2%) on rumors that the negotiations had been paused. By closing, both stocks traded up again slightly above 1 percent. Were things back on track?

Guess not. On Monday, February 8, 2021 Korea time, the Korean car giant said there were no talks. Kia dropped by double digits and Hyundai fell about 5 percent before lunchtime.

Apple CEO Tim Cook

But leak you must not when negotiating with Apple. The tech giant's notoriously strict NDAs involve hefty fines to potential partners. Hyundai previously backtracked on statements that they were in talks with Apple and now it seems they made it official that no negotiations are in play.

Not sure if I completely believe it though. And in business there's no shame for runaway brides to change their minds if the money's right. Whether it really is the end or if it's just a ruse to truly reset the negotiating table in private is still unclear in my mind.

Why This is the Right Deal

But Apple leaving Hyundai-Kia behind would be a major opportunity lost. As far as arranged marriages go, a win-win situation to secure alliances and strengthen the weak points in each other's empire is far more important than the union of two passionate lovers. Two of the same? Sparks of conflict. Opposites attract? Cold-hearted, but more money.

In the layperson's mind, Apple should probably partner with a design powerhouse like Mercedes or BMW. But you probably won't get anywhere with engineers in each company trying to mark their own stamp on the final product.

With an Apple-Hyundai partnership, there won't be the dreaded too many cooks in the kitchen. Based on my observation, Apple wants to be the star pupil in the classroom whereas Hyundai strives to copy the teacher's pet's homework in order to do what it does best: sell the answers to other students. You have two separate kitchens with each company's elites perfectly content to stay in their domain. Or at least the potential.

"One is a dispute within the Hyundai group over which of its two brands, Hyundai or Kia, may get to manufacture a car for Apple, one of the people familiar with the situation said."
- BLOOMBERG, FEB. 6, 2021

Who's Messing it Up?

So who's the runaway bride? It appears to be Hyundai-Kia. But instead of leaving Hyundai-Kia as a "crazy ex-girlfriend", Apple should seduce its way back to get the opportunity to mesh with the psychology of a Korean conglomerate. Many foreign companies find it hard to work in Korea because they don't know the psychological triggers for Korean executives and the rules of the game.

Americans gloss over this cloudy confusion with explanation of "Asian culture" and leave it at that. But there's nothing "Asian" about it. It's sensitive asshole culture with different triggers. Just like American asshole business culture, there's Korean asshole business culture.

“We are agonizing over how to do it, whether it is good to do it or not,” said a Hyundai executive aware of the internal discussions on the tie-up with Apple. “We are not a company which manufactures cars for others. It is not like working with Apple would always produce great results.”
Reuters, January 29, 2020

Who Needs to Fix This and How?

Apple should imagine it is at the court of Versailles negotiating with another noble family. Hyundai sees the opportunity to fill its coffers and satisfy its excess capacity with the deal, but does it result in the loss of status? From the little clues we have, Hyundai is weighing money vs. status. And it's probably having a multi-axis internal power struggle. My hunch is that there's a yes and no camp at each Hyundai and Kia. Some probably see it as a power move while others see it as a loss. So you probably have at least four factions plus the ruling Hyundai family representatives all going at it.

Apple should definitely flirt with other car companies while Hyundai gets its internal units in line. But it should come back around to Hyundai-Kia. There are only about 14 major car conglomerates in the world so there aren't many choice options. Hyundai knows how to make amazing cars now. And in the end, it's easier for them to accept the design calculations from Apple and run with it. Hyundai just doesn't want to be treated like the help.

Korean companies want to have the first mover advantage, but not during the concept phase. They want to be first with production and sales when the market can actually move. Better to save juice for making and selling rather than end up exhausted after turning in a glorious master thesis to the teacher.

As for Hyundai-Kia, it would be dumb if they passed on the Apple deal because secures a landing pad to tie up its acquisition of Kia. It can neatly phase out Kia by ramping up Apple Car production. Allow the technological spill over effects to boost Hyundai products. Expand the Genesis brand. Therefore, any hits to the Hyundai pride can be wrapped up in the denouement of Kia. Create incentives for Kia executives and employees to find opportunity, not threat. Taper the narcissism of Hyundai executives who don't want to be 'second' to Apple. Convince them subconsciously that a serial homework copier should be closer to the kid with the answers not further away.

Respect the Game

For Apple, the answer is not to use design control as concession chips to Hyundai. Apple must address Hyundai's concern of being respected as a leader in the car market. In the end, Hyundai probably doesn't want to deal with the headache of design that hasn't been invented yet.

The deal probably doesn't have to change substantially, but the packaging must. Korean companies are notoriously abusive and dismissive of their own subcontractors and suppliers. Therefore, the mighty conglomerates are not used to being in this subservient role themselves. It's a shattering of their ego and fall from grace to be Apple's lackey and whipping boy. Perhaps the Hyundai team feels condescension from Apple whether real or imagined.

The answer to this isn't more soft sweet-talking platitudes to soothe the 'Asian obsession with losing face'. It's a direct power-to-power player discussion that Hyundai needs to hear from Apple. Apple needs to give Hyundai assurances that they won't be seen by the world as servant boy. Hyundai, I'm predicting, may say they want to control more of the process, but they only want to control it in order to maintain status to be on par with Apple. They probably don't care so much about the work itself.

Conclusion

Prescription: Apple, please package your deal as relief medicine for the headache of design for Hyundai. (Just like anywhere else, many executives in Korea hate accountability for decisions on unproven processes that may go badly.) But give Hyundai more skin in the distribution and sales game by leveraging the carmaker's extensive worldwide dealership network. I bet you could find a clever way to get more stakeholders on board if they smell money. You'll need different sets of people than "Apple Genius" retail associates to sell cars. After all, don't they say the best way to succeed is to help others win too?