Hyundai production to stay in South Korea despite disadvantages

Article by Anita Panait, on November 13, 2013

Despite the disadvantages presented by producing vehicles at its home turf in South Korea, Hyundai Motor Co. will still stick to its local production base. Those disadvantages include longer production time – Hyundai’s local output builds a car on an average of 28 hours, almost twice as long as it is in the United States.

This is despite the fact that Hyundai employs more workers for each production line in South Korea than in the US. Hyundai also has to deal with high wages, frequent work stoppages and outdated facilities. Hyundai's hourly labor costs per worker in South Korea is pegged at KRW24,778 ($22.26) --  16 percent higher than at its US plants.

While the carmaker’s seven domestic plants have helped make it the fifth-largest auto manufacturer in world, they have become a legacy asset that has to be addressed to sustain profit growth.

One of Hyundai’s plants in Ulsan is now its oldest and costliest facility, and it would be for the carmaker’s benefit to shut it down. But Hyundai reiterated that it is not closing its South Korean manufacturing base, saying that fixing productivity issues with its strong local union is a top priority.

“Our home market is our root and the base for our growth overseas. And there's a risk in building cars overseas," according to a Hyundai executive from the team who manages its labor relations. Hyundai's labor union elected the moderate Lee Kyung-hoon as its new president, signaling a period of a more stable industrial relations between the union and the carmaker.

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