Hyundai Opens First U.S. Plant in Montgomery, Alabama

Alabama Offers Lower Wages and More Stable Union Environment

Whats going on in the auto industry these days anyway? GM is building cars in Korea and badging them as Chevys while Koreas Hyundai Motor Co. is starting to build cars in the U.S.

Hyundais second plant in North America, after a failed attempt in 1993, when the company had to shut down its Canadian assembly facility after U.S. sales nosedived due to quality issues, should fair much better.

After all, Hyundai is now considered one of the most reliable new vehicle manufacturers sold into the North American market, according to Consumer Reports and J.D. Power and Associates, two of the most respected third party analytical firms in the auto industry.

That newfound reputation for quality and longtime name for value has resulted in month over month sales records, making the addition of a new production facility critical for continuing growth, by protecting earnings from exchange rate fluctuations while allowing the automaker to bypass importation quotas and increase market share.

Hyundais first U.S. plant, a $1.1 billion investment, recently opened in Montgomery, Alabama. Capable of producing up to 300,000 midsize Sonata sedans and Santa Fe sport utilities per year, the new facility will go a long way to strengthen Hyundais ties to one of its strongest markets, and in so doing expand its footprint as a global automaker.

Why Alabama? The states workers will work for less than those in Detroit, at an average of $29 per hour compared to $38, one of the reasons Honda and Mercedes-Benz have built assembly plants there.

"The localization will clearly make up for our weakest spot on the currency. But we have a potential risks as well," commented David Kim, a senior Hyundai official. "We are not greatly experienced in running day-to-day operations overseas so fostering favorable relations between management and workers is pivotal at the moment."

Hyundais global sales increased by 14 percent last month, compared to April of 2004, bolstered by improved sales in China, India, Russia and other jurisdictions.

In the U.S. Hyundai enjoys 2.6 percent of the market, outselling many automakers that have been available for much longer, such as Volkswagen, Mazda and Mitsubishi.

Like Volkswagen, Hyundai has plans to move up market by introducing new rear-wheel drive models within the next two years. It is unknown, however, whether the new luxury vehicles will be branded with the automakers stylized "H" or receive an entirely new nameplate, similar to Toyotas Lexus brand and Nissans Infiniti. One thing that is expected, mind you, is a much more competitive price point in comparison to Japanese and German premium products, in keeping with Hyundais value proposition which has been a key ingredient to its stellar sales.