Love Letters from Overseas: Strikes at Hyundai Motor Spark Fierce Competition for Plant Relocation | BusinessKorea

Monday, April 20, 2015

Hyundai Motor Manufacturing plant in Montgomery, Alabama.
Hyundai Motor Manufacturing plant in Montgomery, Alabama.
23 August 2013 - 1:17pm

Auto sector strikes are leading to a flurry of love letters from local governments in the US and China in an attempt to persuade Hyundai Motors to set up more plants overseas. 

According to sources in the business community and auto industry, Georgia Governor Nathan Deal secretly met with Hyundai Motor Group Chairman Chung Mong-koo after arriving in Korea on August 20. His secret meeting with Chairman Chung was arranged prior to his visits to China and Japan lasting August 22 to 30.

It was reported that the governor made a request for the construction of a third North American plant in Georgia, where Kia's first manufacturing plant in the U.S. is located. And he was said to give details to the Chairman about stable labor-management relations at Hyundai and Kia's US car factories, as well as inadequate supplies of automobiles. Georgia’s governor also explained his plans to support Hyundai in building a third US plant in his state. He emphasized free infrastructure, funding for job creation, and a tax exemption in the event of the construction of the additional plant. 

But his isn’t the only love letter coming from the US. Alabama Governor Robert Bentley’s moves are also noticeable. The governor of Alabama is competing with Georgia for a third US plant by visiting Korea in October and meeting with Hyundai’s Chairman. 

Hyundai Motors set up a Hyundai factory in Montgomery, Alabama in 2005 and a Kia plant in West Point, Georgia in 2009. Despite its car manufacturing plants in the US, Korea's largest domestic auto maker is grappling with production shortages in North America owing to repeated labor strikes in Korea each year. In 2010, Hyundai decided internally to build a second factory near its plant in Georgia, but changed its emphasis to quality growth due to global economic uncertainty.

However, there is the renewed possibility of a third US plant. Hyundai is currently considering the option in case of a production shortfall caused by labor strikes, so that it can manufacture cars in overseas plants instead. It is worth noting that factories in Montgomery and Georgia are operating at one hundred percent capacity at the moment. 

Therefore, in some sense, the ongoing labor strikes are accelerating Hyundai’s decision to build a third factory in the US.

Meanwhile, there is intense competition between local governments from cities in western China such as Xi'an, Chengdu, and Chongqing for a fourth car plant in China. A delegation of local government officials from western China is due to visit Korea at the end of August in a bid to make a deal with Hyundai Motor for a fourth plant in China. If an agreement is reached, Hyundai's fourth factory will be built in the region. 

In fact, Hyundai Motor is reviewing its plan for constructing a fourth factory in western China instead of Beijing, where its first to third plants are already located. The potential for regional development is growing since the Xi Jinping government is stepping up its efforts to develop the western region. 

A spokesperson for Hyundai Motor Group said, "We are pushing forward with a plan to build a fourth car plant in Chinain order to meet increasing demand in that country," adding, "There are serious problems with production in Korea because of the current walkouts. So, US state governments are vying with each other for the construction of our plant in their region. But no decision has been made yet about building an additional factory in the US."

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