Considering how Hyundai Motor Co has stumbled due to poor quality and labor strife, no one should accuse the South Korean automaker of timidity in its quest to expand in the US.
Hyundai's US sales soared to 346,235 cars and trucks last year, a gain of 41.7 percent. All were imports. Low price was the main reason for growth, as well as product quality that has improved from unacceptable to mediocre. Its Santa Fe small sport utility is a surprise hit in terms of value and popularity.
Hyundai now wants to build an assembly plant in the US, shortening by thousands of miles the distance from assembly lines to US dealers who have been shouting for more vehicles to sell.
Manufacturing costs in dollars will be high compared to costs in Korean won, but cost may be a secondary consideration.
Hyundai, constrained by manufacturing capacity at home, aims to sell 370,000 vehicles in the US this year. The company believes a US manufacturing presence could soothe trade tensions between the US and South Korea, just as the Japanese transplants helped pacify earlier battles between the US and Japan. Hyundai executives have been criss-crossing Mississippi, Alabama, Georgia, Ohio and other states, seeking an ideal site.
The Koreans are learning. Their business style is much more aggressive than that of the Japanese, and sometimes more impulsive. Japan's automakers take a long time making decisions, undertaking elaborate research before moving forward. The Koreans often are quick and bold, unafraid to fail, regroup and try again.
Though Hyundai isn't saying it in so many words, the company has let suppliers and others know it hopes to avoid organization by the United Auto Workers union. Ohio is a tempting site, because it would give Hyundai close proximity and access to many suppliers that already make parts for Honda Motor Co's plants in that state. Chung Mong Koo, Hyundai's chairman, is scheduled to visit Wapakoneta, Ohio, this week, according to the Yonhap News Agency, citing local newspapers.
Ohio, however, is a UAW stronghold, home to several union-represented General Motors Corp. and Ford Motor Co plants. Just because Honda has managed to fend off the UAW doesn't mean Hyundai can. Southern states could be a safer choice because of right-to-work laws; under them, if the UAW does win bargaining rights, workers aren't compelled to join the union.
Doron Levin is a columnist for Bloomberg News. The opinions expressed are his own.
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