Eat your heart out Michal Moore (Roger and Me )!
Ala. plant puts Hyundai on competitive ground
Foreign-owned car firms saving costs across South
May 21, 2005
BY JAMIE BUTTERS
FREE PRESS BUSINESS WRITER
MONTGOMERY, Ala. -- "Hyundai Motor Manufacturing Alabama is officially open for business."
An audience of 4,000 sprang to its feet with applause Friday morning when the president of the Korean automaker's first assembly plant in the United States said those words.
For thousands of new employees, the plant represents a better life. For representatives of suppliers in attendance, it means more opportunities to do business with a growing company. And for former President George Bush, who also was in attendance along with Hyundai Motor Co. Chairman M.K. Chung, it was a vindication of the free-trade policies Bush espoused while in office.
But while the new plant represents another chapter in Hyundai's global ambitions and is a feather in the cap of Alabama politicians, it is above all another sign of how the U.S. auto industry is thriving with foreign-owned plants in the nonunion South, even as Detroit automakers lose share in their home market and see their standing as borrowers slashed to high-risk junk bond ratings.
This plant opening "is likely to draw attention to the growing gap in terms of market momentum and cost position between the transplant manufacturers and the traditional Big Three," said Brian Johnson, who studies the industry for clients of Sanford C. Bernstein. "Specifically, Hyundai has two fundamental advantages" over Ford and GM: "faster, better-executed product cycles and significantly better labor economics."
And it's not just Hyundai.
The Montgomery plant is just part of a wave of foreign-owned plants opening in the South.
Nissan opened a plant in Canton, Miss., in 2003 mostly to make SUVs and pickups that compete with Detroit's biggest moneymakers. Toyota is building a truck plant in San Antonio, Texas, that is set to open next year.
And in Alabama the other two assembly plants -- Mercedes' in Vance, and Honda's in Lincoln, near Talladega -- have both doubled in recent years.
Foreign-owned automakers have invested $27 billion and created 55,000 jobs during the last two decades in factories alone, according to the Association of International Automobile Manufacturers.
New investment has migrated to the deep South where willing workers are available who don't have a union tradition and don't want to risk losing their good wages and benefits -- rewards that are largely designed to resemble the UAW's compensation package.
At Hyundai, production workers start at $14.46 an hour and advance to $21.70 two years later.
"They realize what a fantastic opportunity this is for changing their whole lifestyle," said John Kalson, the plant's production director. "You treat your folks right, why do they need anybody else?"
Although some 20,000 people have applied for or inquired about a job at the plant, it has taken a bit longer than Hyundai expected to find people who really want to do the work day after day, he said.
Workers at the plant said they were told not to speak to reporters.
While manufacturing investments are scattered across the nonunion South, foreign automakers are clustering their research and development and related facilities, such as design and purchasing, around metro Detroit.
Toyota is working to buy property from the state to expand its Ann Arbor-based technical centers. Earlier this year, Nissan opened a new design center in Farmington Hills near its engineering offices.
Hyundai fits that pattern, too. It is opening the Hyundai-Kia America Technical Center in Superior Township later this year.
Hyundai's ambitious American strategy is clearly modeled after the success of Toyota.
On the strength of its improving quality -- once a joke, now an industry leader -- Hyundai was able to gain market share the last two years, even before the new-product onslaught began last year with the Tucson crossover SUV and now the all-new Sonata sedan.
Hyundai's plan isn't going quite as smoothly and Toyota-like as it was drawn up.
It had expected to have 2,000 employees cranking out Sonatas by now. But it just shipped its first trainload of cars May 12, and won't really have the first shift fully staffed until 150 new hires start Monday.
The train is another example of Hyundai not quite matching Toyota yet: Hyundai got a rail spur as part of the infrastructure support in its $252-million incentive package, but Toyota got two for competing railroads to serve its San Antonio plant that is set to open next year.
But along the way, whenever faced with challenges, the company has so far chosen quality over volume.
"Quality is a top priority for Hyundai," Chung, the chairman and son of the company founder, said in a speech.
He spoke in English with subtitles on the screen to help make his meaning clear.
And his reasoning is sound, said Catherine Madden, who studies automotive manufacturing for Global Insight, a forecasting and consulting firm based near Boston.
No automaker "has a more precarious position in quality than Hyundai," she said, noting that a bad result in Consumer Reports or in a J.D. Power survey could torpedo all that has been built, especially as the automaker talks about making Hyundai more of a luxury brand and leaving Kia to the low-cost value shoppers.
And, as former President Bush noted, people remember your mistakes.
"Even after 12 years, people still remember if you threw up on the prime minister of Japan," he said.
Contact JAMIE BUTTERS at 313-222-8775 or butters@freepress.com. |
