Hyundai’s Krafcik Betting on Swift Labor Resolution in Korea

ANN ARBOR, MI – Hyundai Motor America President John Krafcik says it will be difficult for the fast-growing auto maker to maintain momentum in the U.S. this year if brewing labor issues in its home country upset production.

“We hope it gets resolved,” Krafcik tells journalists at an event here for the new-for-’13 Hyundai Veloster Turbo.

Earlier this week, Hyundai’s South Korean unions voted to stage strikes to compel the auto maker to reduce working hours and increase wages.

Hyundai’s U.S. unit sources 40% of its products from South Korea, including the newly launched Veloster, hot-selling Genesis Coupe and near-luxury Genesis sedan. It supplements strong demand for its U.S.-built Elantra sedan from there, as well.

The good news, Krafcik says, is the union agreed to resume talks with management, leading to a spike in the auto maker’s share price back home and optimism among analysts a deal could be reached by the end of next month.

A prolonged strike could exacerbate capacity constraints already nagging HMA’s growth in the U.S. and jeopardize its goal of eclipsing the 700,000-unit mark in sales for the first time in the market.

The auto maker sold 356,669 vehicles in the U.S. in first-half 2012, up 10.5% from 322,797 year-ago, putting it on track for its best year ever.

U.S. market share for HMA through the first six months stood at 4.9%, according to WardsAuto data. That’s down from 5.1% in 2011, reflecting, Hyundai claims, how little it plays in a fleet market experiencing major growth this year.

“We should be able to double (sales) in the second half. But, obviously, if it’s a big strike and it causes us to lose units, it could be tougher,” Krafcik tells WardsAuto. “Our plan is we won’t lose any units.”

The addition of a third shift at HMA’s Sonata and Elantra assembly plant in Montgomery, AL, will help alleviate some of the auto maker’s capacity constraints “a little bit,” Krafcik says. He sees 20,000 additional units from the facility this year and 60,000 in 2013.

But, he admits, HMA will not be able to build to meet demand until it can add incremental capacity, which he characterizes as another assembly plant. And that won’t happen until it proves to its South Korean parent it can deliver the sales.

“Hyundai is a different company. Five or 10 years ago, that capacity would have been in place already,” he says.

HMA must improve product quality and customer satisfaction and generally move opinion of the brand higher, in order to continue to grow demand, Krafcik says.

Meanwhile, HMA’s top executive calls groundless the recent lawsuit by Consumer Watchdog charging the auto maker deceived buyers about the Elantra’s fuel economy by deemphasizing the city estimate in claims of the car’s 40 mpg (5.9 L/100 km) highway rating.

Hyundai lists the city fuel economy in the fine print of its ads, just as federal regulations demand, Krafcik says.

“Look at every new-car launch, all you see is ‘40,’” he adds. “It is emblazoned everywhere. That’s the yardstick we use. It is the comparative index. You can do that safely, and the disclosures are there.”

[email protected]