Hyundai Ups Production to Meet Demand – Car Pro News

For Hyundai’s U.S. dealers wrestling with tight new-car inventories, help is on the way from U.S. plants, but next spring, a new labor pact in South Korea could crimp Hyundai Motor Co.’s exports to North America.
John Krafcik, CEO of Hyundai Motor America, says vehicle production for the United States from September through year end will rise 19 percent over the same period last year.
The extra vehicles will come from a third shift that began production on Sept. 4 at Hyundai’s Alabama plant. That will send an extra 20,000 units of the Sonata and Elantra to U.S. dealers by year end, Krafcik says. Kia’s plant in Georgia will produce about 36,600 units of the 2013 Santa Fe Sport between August and year end, vs. about 22,800 Santa Fes built a year earlier.
The extra vehicles will be welcomed by dealers who for months have been selling from low supplies. The added volume also closely follows weeks of sporadic work stoppages at Hyundai plants in South Korea. A labor agreement was reached last week to end those strikes, which erased production of 82,000 vehicles.
Krafcik estimates that the work stoppages eliminated 5,000 to 10,000 South Korea-made vehicles for the United States. “We should more than make those up with the incremental production on our two hottest products — the Elantra and the Sonata,” he says.
The labor pact casts uncertainty on future output at Hyundai’s South Korean plants.
The new contract jettisons the current work schedule of a 10-hour day shift and a 10-hour night shift in favor of an eight-hour morning shift and a nine-hour evening shift. Hyundai will lose three hours of work every day, or about 15 percent of what is currently being clocked, starting in March.
Hyundai and the union say they aim to maintain the current level of output. They will offset the lost hours by churning out more units per hour and perhaps condensing workers’ non-assembly obligations, such as training sessions, to free more time for the line, a Hyundai spokeswoman says.
Hyundai will begin testing those offsets in January. To get there, the company will invest $264.6 million to improve productivity at its South Korean plants.
“This is the new normal,” said Kim Seong-sang, policy director at the Korean Metal Workers’ Union, which represents workers at Hyundai and other South Korean automakers. “They will increase units per hour to compensate for the lost production.”
Still, it is unclear whether Hyundai’s countermeasures will be enough.
Hyundai’s Ulsan plant — by far the biggest of Hyundai’s three South Korean assembly plants with an annual capacity of 1.5 million units — now makes about 300 cars per hour. So at Ulsan, the new contract could cut output by 234,000 cars a year.
Vehicles exported from South Korea to the United States include the Genesis sedan, Accent subcompact, Veloster sporty coupe and Tucson crossover.
“Hyundai has been running flat out,” said Chris Richter, an auto analyst at CLSA Asia-Pacific in Tokyo. “They don’t have spare capacity lying around. It’s going to put pressure on them to start adding capacity somewhere. Their investors and dealers are going to be screaming for more product.”
Similar dilemmas are looming for Hyundai sister brand Kia and for GM Korea, both of which are locked in labor talks.


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