Strikes Fail to Derail Hyundai Domestic, Export Sales

Despite eight partial strikes that cost Hyundai 42,675 units of production worth 871.3 billion won ($795 million) through Tuesday, Sept. 3, there are no significant signs of the auto maker feeling strong pressure from the line shutdowns.

A spokesman tells WardsAuto the production losses are beginning to interfere with deliveries “somewhat,” but makes no other comment.

In fact, Hyundai this week reports colossal August sales gains both domestically and in markets served by exports from Korea.

Hyundai’s domestic sales last month surged 32.6% year-on-year to 47,680 units, leading and accounting for most of the gains in a Korean market that was up 29% overall.

The spokesman cautions that, “2013 August sales seem higher because of the poor 2012 August performance due to strikes last year, which were concentrated in August.”

August 2012 deliveries tumbled 29.9% from prior-year and 40% from the previous month. Yet even with that caveat, the latest sales numbers are remarkably high.

Hyundai’s exports from Korea greatly outpaced those of all other domestic auto makers, scoring a huge 60.5% gain with 85,888 units sold, not including complete-knocked-down shipments.

Hyundai’s seven overseas plants saw deliveries jump 20.4% to 248,161 units sold, surpassing domestic production by a wide margin and contributing strongly to global sales gains of 29.1%, to 381,419.

Analysts note the partial strikes likely will not affect export sales for a few more weeks until current inventory works its way through the system and shortfalls begin to show up.

Most of them scoff at reports that overtures from overseas government representatives trying to win a new Hyundai plant somehow are tied to the current partial strikes and the Korean labor situation.

They note the current Korean labor climate has long existed and even has been worse at times. Tough bargaining sessions are held each summer, usually involving strike action, with settlements reached before the annual Chuseok holiday, which this year begins Sept. 17.

After the new contract is signed, management invariably hikes overtime schedules and eventually makes up the production losses, the record shows.

Georgia Gov. Nathan Deal was just in Seoul, pitching his state’s willingness to support a new plant if Hyundai Group Chairman Chung Mong-koo should give Georgia the nod. This is in addition to the Hyundai Dymos parts plant announced for West Point, GA, while Deal was in Seoul.

Also coming to the capital this month bearing gifts and promises of big support are delegations from several cities in Western China, hoping to entice Chung to choose one of them for Hyundai’s fourth light-vehicle assembly plant in the country.

It is a foregone conclusion that the fourth plant will have to be built away from heavily congested and polluted Beijing, where the other three plants are located, and Western China presents distinct market opportunities as well.

In October, sources say, Alabama Gov. Robert Bentley will be in Seoul, trumpeting his state’s willingness to bend over backwards to help Hyundai set up another plant like the one near Montgomery that is running full blast.

Hyundai purposefully has spread its new plant investments in seven global locations to balance production in accord with regional demand, and also to avoid currency-exchange traps that could arise if Hyundai’s Korean exports continued to predominate in serving the overseas markets.

Korean exports accounted for 48% of Hyundai’s overseas sales in 2005, but by plan were reduced incrementally to just 30% by 2010.

The planned trend is still in progress. The auto maker reports exports accounted for just 25% of sales outside Korea in first-half 2013 while plants in overseas markets accounted for 75%.

It likely will continue that way as overseas production capacities are increased.

Despite Chung’s announcement at the start of 2013 no new plants would be built over the next two years, capacity in China will be up significantly by 2014.

Beijing Hyundai will boost annual output from the current 900,000 units to 1.05 million, a gain of 150,000.

Next year will see completion of the Sichuan-Hyundai commercial-vehicle plant capable of producing 140,000 trucks and 10,000 buses annually. Ground was broken last August for the new plant in Ziyang City in the eastern province of Sichuan.

The wisdom of having carefully balanced production spread across seven major world markets unquestionably saved Hyundai’s bacon for the first seven months of 2013. Sales were down in the European Union, Korea, India, the Middle East and showed only a 2% gain in the U.S.

However, Beijing Hyundai in China showed healthy 34% sales growth over the same period with 572,000 units and the auto maker’s South American sales spiked 47% to 210,000.

Meanwhile, the struggle at the bargaining table continues.

Kia, also a member of Hyundai Motor Group, is racking up strike-related production shortfalls, too.

A spokesman tells WardsAuto that since Aug. 21 Kia has lost 57 hours of production in four partial strikes and two strike-related weekend-work refusals. This translated into production losses of 12,522 units valued at 222.9 billion won ($203 million).