To Meet Back Orders
Hyundai Motor has suggested that it might shift the production of the Palisade SUV from Korea to the United States.
The automaker's move is a response to the recently erupted conflict between the labor unions at its plants in Ulsan and Jeonju over the allocation of work.
Production of the SUV model is failing short of market demand, but the conflict between the two labor unions is making it difficult to increase its output.
Consequently, Hyundai Motor has recently announced in an internal newsletter that it may push for U.S. production of the Palisade, saying that it cannot let a labor-labor conflict hamper its plan to ramp up Palisade production.
The announcement came on Oct. 1, one day after a scheduled meeting of the Employment Security Committee was canceled due to violence between the labor unions of Ulsan Plant 4 and the Jeonju plant. A union official from the Jeonju plant was assaulted and taken to the hospital on his way to the venue of the meeting, which was arranged to discuss reallocation of work between the two plants.
The Palisade output at Ulsan Plant 4 is not enough to meet demand, while workers at the Jeonju plant, which produces commercial vehicles, have not enough work to do.
To solve this problem, Hyundai Motor proposed the transfer of Staria production from Ulsan Plant 4 to the Jeonju plant. The Staria, a multipurpose vehicle (MPV), can be produced at the Jeonju plant, but the Palisade can only be produced at Ulsan Plant 4.
Yet, the labor union of Ulsan Plant 4 refused to hand over Staria production and proposed that the Jeonju plant only produce 20,000 units of the Palisade to meet the back orders.
Then, the labor union of the Jeonju plant demanded that it be allowed to produce both the Palisade and the Staria.
Hyundai Motor thinks that it is better to produce the Palisade in the United States than at the Jeonju plant because it takes an investment of 250 billion won and 26 months to retool the Jeonju plant to produce the Palisade at the Jeonju plant. In particular, it is difficult to secure high product quality initially at the Jeonju plant as it takes time to stabilize production. On the other hand, if the Palisade is produced in the United States, the investment cost will drop to 20 billion won and the construction period will be decreased to 10 months. On top of that, since U.S. factories produce SUVs, they can reach the desired level of product quality early.
"If the work allocation negotiation is not completed before the union election, we have no choice but to produce the Palisade at our U.S. factory to resolve the supply shortage," a Hyundai Motor official said.