Local Presence Boosts SE Economy
Few people in Mongomery, AL, 800 miles south of Detroit cared much about the auto industry until Hyundai announced it would build cars here nine years ago, according to reports made by the New York Times.
At Hyundai‘s Montgomery plant, rarely do more than a few weeks pass without word that another parts supplier has dozens of new positions to fill, typically offering good benefits and double the pay that the average Alabaman earns.
Hyundai and its sister company, Kia, which opened a plant last year just across the Georgia state line, have brought thousands of well-paying jobs to the region and even helped nurture a little Korean culture in Montgomery, the first capital of the old Confederacy. Hyundai is running its Montgomery plant almost nonstop. Rarely do more than a few weeks pass without word that another parts supplier has dozens of new positions to fill, typically offering good benefits and double the pay that the average Alabaman earns.
Hyundai, which will observe its 25th anniversary selling vehicles to American drivers on Sunday, was little more than an ambitious, second-tier brand when it chose to build its first United States car factory just south of Montgomery. But during the recent recession, the South Korean company thrived as Americans sought out cheap cars just as Hyundais were improving in quality.
In 2010, Hyundai and Kia each posted their highest sales in the United States and, taken together, surged ahead of Ford Motor to become fourth-largest automaker worldwide. Hyundai built 300,000 cars in Montgomery last year and sold most of them in the United States.
“If folks looked deeply at how far we’ve gone so quickly, from having no U.S. production five years ago to where we are today, it’s amazing,” John Krafcik, chief executive of Hyundai Motor America, said. “I don’t know that any company has gotten to such a high level of local assembly as Hyundai that fast.”
While Michigan’s dependence on the auto industry caused it to have one of the nation highest unemployment rates in recent years, the presence of Hyundai and Kia has helped Alabama keep its jobless rate among the lowest in the Southeast even as textile mills continue to close.
“As far as the pay, nobody else around here can compete with them,” said Richard Watson, a former auto mechanic who was out of work for a year and a half before getting a temporary job at the Kia plant in West Point, GA, last fall. He said some of his co-workers drove two hours each way because the plant’s jobs were in such demand.
Hyundai is running its Montgomery plant, which employs 2,650, around the clock on weekdays and occasional Saturdays to keep up with demand. Last summer, it moved production of its Santa Fe sport utility vehicle 95 miles northeast to the Kia plant to free capacity in Montgomery. Kia recently hired 600 additional workers to operate a second shift for the Santa Fe and plans a third, with 1,000 more jobs.
Both carmakers expect to easily top their 2010 sales in the United States this year.
Hyundai’s sales were up 22 percent in January; Kia’s rose 25.6 percent, the highest among the industry’s larger players. Together, the two sold more than 65,000 vehicles, about 5,000 short of surpassing Chrysler.
Hyundai makes its own engines in Montgomery, and transmissions for its cars come from a Hyundai-owned company, Powertech, which is attached to the Kia plant. Alabama lists 138 suppliers that support the Hyundai plant, directly or indirectly. (Some also do business with the Honda and Mercedes plants near Birmingham and the Toyota engine plant in Huntsville.)
“These jobs have good salaries and good fringe benefits, and are more self-fulfilling” than the ones that have left the area, said Seth Hammett, director of the Alabama Development Office. “The automobile business has really been good for Alabama.”
Near the car plant on the south edge of town, a Hyundai subsidiary that makes electrical transformers is building a factory that was originally supposed to create about 500 new jobs. Even before construction began last year, the company had doubled that estimate, to 1,000.
The factory will undoubtedly receive a crush of job applications, much as Hyundai did when it was first increasing production.
“It was like a rock star was coming to town,” said Ashley Frye, vice president of production for Hyundai Motor Manufacturing Alabama. Mr. Frye said that when he wore his Hyundai jacket or shirt around town, people often approached him to ask, “Are you hiring? What can I do to get a job out there?”
For more than a year, workers at the Hyundai plant have been putting in 10 hours of overtime a week as part of their regular schedule, plus occasional Saturdays. With an average regular wage of about $20 an hour, the additional overtime hours mean workers here are earning more than many workers at the unionized plants up north.
The United Automobile Workers union has long tried to organize plants in the United States operated by foreign carmakers, most of which are in the South, but has yet to succeed anywhere.
For 2011, Hyundai is working to increase the plant’s output by an additional 10 percent, or 30,000 vehicles, Mr. Krafcik, the chief executive, said.
The plant builds the Sonata midsize sedan and the newly redesigned Elantra compact car.
Hyundai is opening its new state-of-the-art headquarters in Fountain Valley, CA, late next year. Officials said the new campus doubles the size and capacity of the current building, “giving Hyundai and its employees an environment conducive to growth as it prepares to help write the next chapter of a great American success story.”
John Krafcik reminisced that “As far as we’ve come since 1986, we still feel we're in the early stages of connecting the Hyundai brand to the U.S. consumer.
“We’ve always challenged convention—from our powertrain strategies, to our consumer partnership programs, to our unique Genesis and Equus retail approach,” Krafic stated. “It’s authentically Hyundai to question the status quo and pursue our own vision of how things should be in order to best serve our customers. This willingness to challenge convention will continue to guide us these next 25 years.”