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Hyundai Mulls Adding To U.S. Production Capacity

Maker may tweak Alabama plant to build more vehicles.

by on Jun.24, 2013

Hyundai Motor America CEO John Krafcik.

Despite a harried sales pace for the year featuring a record-setting performance in May, Hyundai is still pondering whether to add more assembly capacity in the United States.

Hyundai Motor America Chief Executive Officer John Krafcik said during a visit to Detroit that automaker isn’t sure it’s the right time to add more production capacity in the U.S.

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The maker’s U.S. plant in Montgomery, Ala. is running three shifts. Hyundai added the additional shift last September, which bulked up production by 20,000 units annually.

“Right now there are no plans to add production, but we are evaluating it,” Krafcik said. “We said that we want to get our quality operations systems absolutely ideal in every aspect of the company. Once we have those things running very, very well, we’ll make that decision.”

He also noted Hyundai’s top management has opted to hold worldwide capacity at about 7 million units while focusing on improving the overall quality of the company’s vehicles.

“I feel that’s the right thing to do,” added Krafcik, who later acknowledged the decision to hold off on construction of another plant could wind up costing the company market share as the sales volume in the U.S. continues to climb. However, Hyundai is looking at ways to tweak the existing capacity in the U.S. to build some additional units, he said.

Hyundai and Kia sales numbers have trailed behind the overall market since last autumn and both carmakers have blamed the sluggish performance on dealer shortages of certain models.

Markets have been somewhat volatile of late, Krafcik added. “But that said, the economy is getting stronger.”

Krafcik also emphasized that while Nissan, one of Hyundai’s top rivals, announced a series of price cuts in early May, reports of a full-scale price war seem overblown. In addition, the depreciation of the yen, promoted by the Japanese government, actually does relatively little for companies such as Nissan, Honda and even Toyota because they have so much manufacturing capacity in the U.S. now.

“The first month wasn’t an indication of oh, the re-pricing was successful or not,” he said. “It said, if you put bigger discounts on your car, you’ll sell more of them. We already knew that as an industry. The question is now, is it going to stick as the big rebates go away?”

Krafcik also re-iterated, despite rumors to the contrary, Hyundai has no plans to get into the pickup truck market, which is completely dominated by the American manufacturers. However, Hyundai is looking at ways of expanding its share of the crossover market where it now lags it rivals.

Krafcik was in Detroit to accept an award that was a tribute to Hyundai’s consistent success during the past five years. He accepted the “Automotive Executive of the Year,” presented annually by DVN Business Assurance.

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Robert Djurovic, executive director of the award program, said Krafcik won the nod because he “reshaped the way Hyundai approaches the market with consumer focus, compelling design and enduring value.”

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While speaking at the award ceremony, Krafcik said that he was humbled by the recognition and that he accepted the accolade on behalf of Hyundai team members, dealers and suppliers. Recent winners include: Chrysler’s Sergio Marchionne, Tesla’s Elon Musk and Ford Motor Co.’s Alan Mulally.

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