Having many cars on the parking lot and little or no customers is any dealer’s nightmare. On the other hand, not having enough cars to satisfy the clients that walk into your dealership is something of a problem, too.
Hyundai North America CEO John Krafcik said that the company, which currently has difficulties keeping up with demand due to a tight inventory, will increase U.S production by 19 percent from September until year’s end compared to the same period in 2011.
The increase will come thanks to the addition of a third shift from September 4 at Hyundai’s Alabama plant. Krafcik estimates that this will enable U.S. dealers to get their hands on an extra 20,000 Elantra and Sonata models for the remainder of the year.
Sister company Kia is also ramping up production of Hyundai's recently introduced Santa Fe Sport as its Georgia plant is scheduled to manufacture 36,000 vehicles between August and year-end, a substantial increase to the 22,800 units built in the same months of 2011.
The Korean group, which is the fifth largest car manufacturer in the world, is experiencing shortages due to the disruption in production caused by the recent strikes at its South Korean plants.
Krafcik told Automotive News that the upheaval, which was recently resolved, caused a shortage of 5,000 to 10,000 US-bound vehicles, but was confident that “we should more than make those up with the incremental production of our two hottest products – the Elantra and Sonata.”
South Korea-assembled vehicles that are shipped to the States include the Accent subcompact, the Veloster coupe, the Genesis sedan and the Tucson crossover.
The new labor contract, which will change the shift schedule at Hyundai’s South Korean plants, means that from March 2013, three hours per worker, or 15 percent of current work time, will be lost, while the company has also increased their wages making exports less competitive.
A good example is Ulsan, Hyundai’s biggest South Korean plant: with an annual output of 1.5 million units, the new working hours would decrease production by 234,000 vehicles per year.
To maintain output at normal levels, Hyundai will invest US$264.6 million in improving productivity in its Korean factories and will probably reduce the time needed for non-assembly activities such as training sessions.
Some analysts, like Chris Richter at Tokyo-based CLSA Asia-Pacific, aren’t quite so sure that production will catch up with demand: "Hyundai has been running flat out," Richter told Autonews. "They don't have spare capacity lying around. It's going to put pressure on them to start adding capacity somewhere. Their investors and dealers are going to be screaming for more products."
By Andrew Tsaousis