SAO PAULO ― The roads in Piracicaba, a rural town two hours’ drive from the city of Sao Paulo, are dug up on the shoulders and center dividers. Construction workers drill and repave roads, and where there were only sugar plantations five years ago, there is now a hive of activity.

This is the production hub of Hyundai Motor Brazil, a subsidiary of Hyundai Motor Group that opened its first Latin American factory here in 2012 as part of its overseas expansion into emerging economies. And as Hyundai’s operations grow, so does the town, to the delight of the local government, Hyundai officials said.

“The community received (us) very well,” said Eugenio Cesare, director of production. “Hyundai is very happy to be here in Piracicaba, and it seems that Piracicaba is also happy to have us here.”

The $700 million factory is surrounded by more than 20 companies, both Korean and Brazilian, that operate solely to supply parts for the HB20, a sedan, hatchback and crossover designed exclusively for Brazil. With the burgeoning success of the HB20, consistently among the six best-selling cars since its launch, Hyundai Motor Brazil has been able to create 5,000 direct and 20,000 indirect jobs in the city, the company said.

“With Hyundai, there was a nice movement of creating more jobs in this area,” noted Mauricio Jordao, communications chief for Hyundai Motor Brazil. Starting with 2,000 workers on the HB20’s two-shift assembly line, the factory boosted production just a year later from 150,000 to 180,000 units annually, raising employment by 700 with the implementation of a third shift in September.

“The impact is very strong. This city was not familiar with the automobile industry. So (for) most of our employees, it’s the first time working on an assembly line,” added Cesare. “We have a very good impact in terms of technology learning, in terms of social impact also for the community.”

The effects on the local community are palpable, not only in current employment but in the quality of future jobs, the officials added. Hyundai Motor Brazil is the first automotive company to participate in the Brazilian government’s Science Without Borders project, sponsoring university students to spend 1-3 months learning and practicing at Hyundai’s research and development or design centers in Korea to finish their studies. Since joining the project in May 2012, Hyundai has sent 150 students to Korea.

Ahead of the groundbreaking in 2010, Hyundai was welcomed as part of a public initiative to attract big companies, increase the quality of jobs and raise tax revenue, according to Jordao.

“All this was a movement of the government and municipality to bring technology to this area,” he said, adding that in line with the initiative, big companies are now moving into neighboring cities for the development of the region and being welcomed with open arms by the community.

Before the plant was established, many kids would finish their studies in the town, but went to big cities such as Sao Paulo to work.

“Now they can graduate and stay here,” Jordao said.


Inside the factory

The factory teems with activity 21 hours a day to produce 180,000 cars a year. Using 120 robots on a maximum-automated assembly line, the factory builds the 1.0-liter and 1.6-liter vehicles with the one-kit system also used in Hyundai’s factories in Korea.

The system arranges 60 percent of the car’s parts in one cart that gets handed through the assembly line together from the start of production to the final touches.

Through a computerized system, the mounting team chooses the car parts and arranges the pieces in a box to be checked by a scanner. Then the box automatically follows the vehicle.

“Compared with conventional assembly lines, the advantages of this process are the easy material handling, smaller presence of feeding trolleys in the production line and elimination of errors, since the employee gets the right part for mounting into his or her work station, both in relation to the specification and the quantity,” said Cesare.

While used in Korea, this supply system is the most complete in Brazil and has a greater breadth of operation than at rival plants, local Hyundai officials said. The 30 members of the team overseeing this system were trained locally by Korean technicians.

It has since become Hyundai’s global benchmark, serving as a training center for the brand’s other operation teams that will use the system in their own assembly lines such as in the U.S., officials noted.

Piracicaba is also the only Hyundai plant in the world that uses flex-fuel technology ― turning conventional gasoline engines into ones that can consume both gas and the cheaper ethanol, an industry standard for economical drivers in the compact segment.

Ethanol, made of sugar cane here since the petrol crisis of the 1980s, is plentifully supplied, 70 percent cheaper than gas and not vulnerable to global oil prices.

The Piracicaba factory has a special assembly line to make the parts that process the ethanol corrosion-resistant, change the fuel injection system and add an assistance device to cold start the engine.

“We receive the ‘basic’ engine without some components and we add the remaining parts locally,” noted Jordao. “In the other Hyundai plants in the world, either they produce the engine totally, or they receive the complete engine from Korea.”


No major expansion plans

With the plant operating at full capacity, the huge potential in the Brazilian market is keeping the company busy, with no plans on the horizon to export or build a second factory, officials said. As the HB20 is designed not only for Brazilians’ particular design tastes but also with gas-ethanol flex-fuel engines that have become the industry standard in the local compact segment, rolling out a version to export would take considerable research and development, they added.

Jordao said that with less than two years in operation, the company is planning “no major increase in installation.” For now, it will focus on stable growth and quality improvement in line with Hyundai Motor Group’s global strategy.

“We still need to work more in this rhythm, with this project. Then we can evaluate if we’re going to make another move,” he said.

“Now the movement is not to grow the production volume but to really increase the quality of the whole production process,” he said, adding that it would work on eliminating bottlenecks, improving the specifications of the HB20 and investing in new variations of the model.

But Hyundai expects its potential to grow, even as market conditions have turned sour for its competitors. Hyundai was the only car maker here that had positive sales growth in the first half, officials noted, though company officials expect a challenge in the second half due to persistent economic sluggishness, presidential and state elections, and competition from market leaders Volkswagen, GM, Ford and Fiat.

“We know the market, this segment is very, very competitive so we must be No. 1 in terms of quality. So we do not concede on quality at all,” said Cesare, the factory manager. “I think this competitiveness makes us aware of continuous improvement.”

By Elaine Ramirez, Korea Herald correspondent
(elaine@heraldcorp.com)