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Mooooving Forward

Ward's AutoWorld, May 1, 2004 12:00 PM

Just 26 months after announcing it would build its first plant in North America at a site near Montgomery, AL, Hyundai Motor Co. Ltd. will complete construction in June and start trial production a month later.

Hyundai Motor Mfg. Alabama (HMMA), the subsidiary charged with bringing the $1 billion project to fruition, says it has encountered no snafus despite heavy rains during February.

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The first of two vehicles to be produced here — the next-generation Sonata sedan — will continue in mass-production trials from July until the kickoff of Job 1 next March. The new Sonata will debut at the Paris auto show next September.

Output of the Santa Fe cross/utility vehicle, built on the same platform as Sonata, is scheduled to start early in 2006, and the plant is targeted to reach full capacity in 2007.

The relatively long trial period — eight months — is consistent with other new automotive plants, says Director of Purchasing and Procurement Rob Cyrus. “We want to give it a good look,” he says. “Our emphasis is on quality” when salable cars roll off the line.

HMMA thus becomes the ninth offshore auto maker to dig roots in North America and the fourth in Alabama, where Mercedes-Benz U.S. International Inc., Toyota Motor Mfg. Alabama, and Honda Mfg. Alabama LLC are in the midst of expansion projects (see p.35).

At full capacity, the new Montgomery facility will employ 2,000 and could build 300,000 vehicles yearly. HMMA sources say no other vehicles are slated for the plant, although they confirm it has the flexibility to produce four different models.

There's speculation another Hyundai model or a vehicle for Hyundai Group's Kia Motors Corp. subsidiary might find a home here. But if its stated plans hold true, Hyundai is expecting big things from its American-built Sonata and Santa Fe. Both posted large gains in 2003, Sonata sales were up 21.0% and Santa Fe's rose 29.4%, but together they accounted for 185,000 sales, or roughly two-thirds of HMMA's projected capacity.

To be sure, Hyundai is on a roll. Sparked by improved quality, a 10-year, 100,000-mile (160,930 km) warranty and additional product niches, the South Korean auto maker boosted its U.S. market share to 2.4% in 2003 from 2.2% the prior year as sales edged over 400,000 for the first time, up 6.7% from 375,000 in 2002.

It also has added a California engineering and design center and is building a $50 million, 4,300-acre (1,740 ha) proving ground in the Mojave Desert 100 miles (161 km) north of Los Angeles that will open this summer.

Both moves are signs it intends to become a much bigger player in the U.S. market after courting disaster in the late 1990s when sales hovered around 100,000 vehicles annually.

“On land that was once a cow pasture,” says HMMA President Y.S. Kim, “today grows 2 million sq. ft. (185,800 sq. m) of automotive excellence” sprawling over 1,744 acres (705 ha) near Interstate 65 approximately six miles (10 km) from the state Capitol in downtown Montgomery.

The plant includes all major operations: stamping, welding, painting, general assembly and engine assembly. It's said to have some of the largest stamping presses in North America — monstrous 54-ton (49 t) jobs built by IHI in Japan and shipped here through the Port of Mobile and hence via the Alabama River.

Stampings are delivered to the welding stations using an “electro mono rail” system. The engine facility will manufacture Hyundai's new aluminum-block Lambda V-6.

Radiating in all directions from here are supplier plants based in 13 Alabama counties that will feed the new complex.

Originally HMMA expected to sign contracts with about a dozen Tier 1 component suppliers. That number now totals 23, including a few Tier 2s, and another six suppliers are expected to join the group shortly, says Cyrus.

“We'll have 60 to 65 Tier 1s when commodities are included,” he says. Sonata already is completely sourced and Santa Fe sourcing stands at 95%, he adds.

The current list includes a 50/50 mix of U.S. and Korean companies, with one Italian supplier, Teksid Aluminum North America (engine blocks and heads).

American mainstays include AP Technologies, Arvin Meritor Inc., Delphi Saginaw Steering, Englehard Corp., Lear Corp., PPG Industries, and two minority firms: the Bing Group (which supplies head and arm rests to Lear) and the Tire and Wheel Assembly Co., which supplies tire/wheel assemblies in sequence.

Among the South Korean companies setting up operations in Alabama — all traditional Hyundai suppliers — are Sungwoo (batteries), Halla (climate controls), Hissan (brake and fuel lines), SMART Alabama (small stamped metal parts), Dongwon (door frames) and Daehan (insulation).

Asked if he has driven a hard bargain in signing up suppliers, Cyrus says, “That's not my style. The basics are the same as at Toyota or Honda (U.S. plants): Competitive bidding, technology and management.”

Supplier investments either planned or completed now have reached $475 million in Alabama, with employment pegged at nearly 4,000 when all are up and running.

Steve Sewell, executive vice president of the Birmingham-based Economic Development Partnership of Alabama (EDPA), says the HMMA project is creating jobs to replace those in apparel and textile plants that have closed in recent years.

“The most significant thing Hyundai and its suppliers bring are quality jobs for Alabama,” where unemployment in some rural counties is 12% or higher — double Montgomery's rate.

Projected wages may seem modest compared to unionized U.S. Big Three plants, but they are deemed at “quality” levels hereabouts: $14 hourly for line workers, rising to $21 after 24 months, and $18.50 for maintenance jobs, climbing to $24 after two years.

HMMA employment now stands at 320 and is scheduled to reach 1,000 by year's end, and double by 2007 when capacity is reached with 1,600 in production and maintenance jobs and 400 in administration.

Some 250 employees each will spend a month at Hyundai's Asan plant in South Korea this year. Hiring is limited to Alabama residents, and so far 11,000 have applied, says Lang.

Like other transplants before it, HMMA has recruited from other auto makers for key jobs. Cyrus, for example, started with GKN Automotive Inc., joined Toyota Motor Mfg. as a buyer at Georgetown, KY, in 1989, and in 1994 moved to Mercedes-Benz U.S. International in Vance, AL, during its start-up, where he was assistant purchasing manager and team leader.

Cyrus became HMMA's “first American employee” in May 2002. Asked why he made the change, he had a one-word reply: “Opportunity. I've always been a car buff, and I'd followed Hyundai, business-wise. What we're doing reminds me a lot of Toyota at Georgetown.”

If HMMA can match Georgetown, it will have come a long way in its quest to become a major player in North America.

Sweet Home Alabama

Mercedes-Benz U.S. International Inc., Vance, AL

  • Original investment/startup 1984: $400 million to build 80,000 SUVs annually, with employment of 2,000.
  • $600 million expansion under way to double production to 160,000 and employment to 4,000 and add a new vehicle, Grand Sport Tourer (GST). Completion in 2005.

Honda Mfg. of Alabama LLC, Lincoln, AL

  • Original investment/startup 2001: $420 million to build 150,000 engines and vehicles annually (Odyssey minivans and V-6s), with employment of 2,300.
  • $580 million expansion under way to double production to 300,000 vehicles and engines annually and add Pilot CUV, with 2,000 additional employees. Completion this year.

Toyota Motor Mfg. Alabama Inc., Huntsville, AL

  • Original investment/startup 2003: $220 million to produce 120,000 V-8 engines annually for Tundra fullsize pickups, with 350 employees
  • $20 million expansion to raise capacity to 250,000 engines annually, including V-6s for Tundra and Tacoma compact pickups, with 150 additional jobs. Completion in 2005.



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