The tremendous success of the Hyundai-Kia model in the Southern Auto Corridor
By Mike Randle
They share a corporate headquarters in Seoul, South Korea, and together they represent the world's fifth-largest automaker. Their engineering teams work long hours at the design studio they have built together in Southern California. But in North America, the only place where Hyundai and Kia build cars is in the Southern Auto Corridor.
Yes, Korean automakers' Hyundai and Kia are indeed joined at the hip in more ways than one, particularly in Alabama and Georgia. Hyundai's plant in Montgomery, Ala., is only 90 miles from Kia's facility in West Point, Ga. The two facilities share an extensive Korean-based supply chain that includes an engine plant in Montgomery and a transmission facility in West Point, a business model that no other two automakers enjoy in the South. The model is working so well that other automakers and experts in the field have definitely noticed.
It wasn't too long ago that all Hyundai and Kia cars and SUVs were relegated to cheap rental car fleets. Today, instead of a cheap car at a cheap price, Hyundai and Kia models are some of the most sought-after vehicles on the market. The Korean automakers' success has helped the economies of central and east Alabama, as well as west Georgia, during some trying times.
"I can tell you that when the economy crashed, there were no companies looking to add jobs here," said Jane Fryer, executive director of the Meriwether County, Ga., Industrial Development Authority. "But there was Kia bringing in suppliers right and left during the recession. It was a lifesaver. Had we not had Kia, this part of west Georgia wouldn't have weathered the recession."
Before moving over to neighboring Meriwether County, Fryer was the head honcho economic developer in Troup County, Ga., where the Kia plant is located, and was the local point person for the Kia project. "It was hard to believe; here we were in Troup County, Ga., working on a project of that size. At the time, there were no jobs in the West Point area. Everyone had worked in the textile mills, but by the time Kia arrived those had all closed. Kia gave this area the opportunity to keep its people here, their children and grandchildren here. I hear it all the time, 'What would we have done without Kia,' " Fryer said.
Kia and Hyundai are not just outstanding corporate citizens providing lots of good jobs at fair wages in Alabama and Georgia; they are very good at designing and manufacturing automobiles.
Ellen McNair -- like Jane Fryer in Georgia -- was at the Montgomery (Ala.) Area Chamber of Commerce when Hyundai announced its plant there in 2002. McNair continues to work for the Chamber and is Hyundai's primary economic development contact. "Their productivity is just unbelievable," McNair said of the Korean automaker. "Their stamping facility here in Montgomery has won top stamping plant in the world for four straight years," according to The Harbour Report. "Hyundai Motor Manufacturing of Alabama," McNair continued, "was named the most efficient and productive OEM in North America. The engine shop has won No. 1 engine plant two years in a row. JD Power just named the Sonata the most dependable car. It is just amazing what they have accomplished in a decade."
McNair continued. "My father was a Korean War veteran and he was in Seoul in the 1950s. He told me about the devastation in that city. In one lifetime, look at that city today. It is the most amazing city, and in one lifetime it has come up from the ashes. It is that culture that built Seoul back to one of the top cities in the world."
The Korean culture is obviously one that can assist in building pretty good cars, too. Yep, Hyundai and Kia are doing it right. The success of the two automakers is off the charts, posting strong sales growth even in the depths of the recession. Their success has been attributed to reasonably priced vehicles, above average fuel efficiency and improved quality year after year.
Hyundai's plant in Montgomery and Kia's in West Point are maxed out on the production front, with employees working three shifts seven days a week. In an AP story published in July, Hyundai's U.S. CEO John Krafcik said that both of the company's U.S. plants are on the maximum three shifts with workers topping out their overtimes, yet they still can't keep up with demand. "We have tapped everything at this point," Krafcik said. "There's nothing left."
When there is "nothing left" in terms of additional capacity, when every car you make is already purchased and sales growth lags because your facilities can't make enough vehicles to meet demand, most automakers simply start a site search -- one that experts have predicted would have started three years ago for Hyundai -- for another plant. Or, at the least, build additional lines at current facilities, which both the Montgomery and West Point sites can accommodate.
But what does Kia and Hyundai do? They cool the expansion talk and take a couple of years off to work on quality issues. How cool is that?
In a story published by Reuters in May, Hyundai Motor Group Chairman Chung Mong-koo shot down the ever present speculation that Hyundai and/or Kia will build new plants in the next couple of years in the Southern Auto Corridor or in Mexico. "We have no plan (for a new U.S. factory) for now," said Chung.
The Montgomery Chamber's Ellen McNair said, "Chairman Chung made the decision to improve the quality of the vehicles. He saw how some other automakers expanded and expanded and then they ended up with thousands of recalls. Hyundai has the capability of expanding the plant here in Montgomery on their tract and there are 2,000 acres across the Interstate (I-65) if they want it. But we have been told that they have made the decision to put off expansions for now," McNair said.
It's got to be difficult for Hyundai and Kia's leadership, after several years of remarkable growth, to stand pat from a production standpoint. Capacity limitations, not just in the U.S., but worldwide, have slowed growth to about two percent this year. Automakers in the U.S. are enjoying 10 percent growth rates so far in 2013, which has turned out to be an outstanding recovery year for vehicle sales.
Hyundai's U.S. CEO John Krafcik said in a recent article published by Automotive News, "We're building the whole business model around that constraint. It's a very different strategy than anyone has ever taken in the industry. It's going to be a very positive thing for us five to 10 years down the road," Krafcik said.
With Hyundai and Kia slowing expansion for a period, the importance of the automakers' facilities in West Point, Ga., and Montgomery, Ala., will be very positive things for those two communities as well five to 10 years down the road. In Georgia, there are about 3,000 workers housed at the Kia assembly plant and about 5,800 employees working at 20 parts suppliers to the facility. Most of those suppliers are located in Troup, Harris and Meriwether counties.
For tiny Meriwether County, Kia has been a blessing. "When I got here, there were only 1,200 manufacturing jobs in the entire county," said Fryer. Mando Meriwether (Korean supplier to Kia and Hyundai) will employ 1,000 manufacturing workers once its casting facility is completed. The company is bringing in casting work to west Georgia that it used to perform in Korea.
Located between Kia's plant in West Point and Hyundai's plant in Montgomery is the growing metro of Auburn-Opelika, Ala. It's been the best of both worlds for that east Alabama market in that it has landed companies that do work for both automakers. "Mando, Daewon, Hanwha, Seohan, they just keep on expanding," said Lori Huguley, director of economic development with the City of Opelika, about the Korean parts suppliers there. "The Koreans have a strong work ethic. They will outwork you and that's a big part of their success. They also do a tremendous job of forecasting."
Over in Montgomery, more than 70 companies have followed Hyundai from Korea to central Alabama, with Montgomery landing over 25 of them. Hyundai Motor Manufacturing Alabama is a $1.7 billion commitment to the U.S. market and more than 3,000 workers are housed at the assembly operation with an additional 5,500 jobs coming from suppliers to the plant.
"Hyundai's facility here is huge for us," said McNair. "We are blessed to have Hyundai here. I have tremendous respect for this company and the Korean culture they have brought to Montgomery."
A phone call to Jane Fryer in 2005
By Mike Randle
Here is a great story about Jane Fryer. In the fall of 2005 I was in Virginia on a sales trip. I got a call from Gray Swoope, then the executive director of the Mississippi Development Authority and he told me Kia's site search in Mississippi wasn't going well. I said to Gray, "I guess that means Kia's not going to Mississippi, huh Gray?" He confirmed that.
Knowing that Kia wouldn't venture far from the mother ship, which is Hyundai's plant in Montgomery, Ala., I pulled off the Interstate and took a look at the Road Atlas sitting in the passenger seat of my rental car. If Kia wasn't going to Mississippi -- and I knew they weren't going to Alabama -- then I figured it had to be Georgia.
I put my finger on Interstate 85 out of Montgomery as it ran it into Georgia. Once over the border, the first stop on I-85 was Troup County, Ga., and the county seat of LaGrange, Ga. That was the county my good friend Jane Fryer represented.
I immediately called Jane on my cell phone and she answered. I asked, "Jane, have you heard from Kia?" She was surprised and said that she had not heard from anyone representing the Korean automaker. I then said, "Well, you are about to." Five months later, Kia officials announced that Troup County, Ga., would be the location of its first North American plant.