[THE INVESTOR] Hyundai Motor
's domestic production has declined rapidly in recent years, falling to around 30 percent of all cars produced by the automaker.
According to data released by the carmaker's labor union last week, production at its domestic plants which once peaked at 65 percent in 2007, has been falling since, with its overseas plants taking a bigger share.
An assembly line at Hyundai Motor's Alabama plant.
In 2010, 1.74 million units, or 48.1 percent of its entire car production of 3.62 million, were manufactured at its local plants. The domestic share dropped to 46.4 percent in 2011, and continued to fall to 43.3 percent in 2012, 38.8 percent in 2013, 37.9 percent in 2014 and 37.6 percent in 2015.
The 2016 domestic share is also expected to hover around 30 percent, hit by the ongoing labor strike that has triggered workers to walk off their jobs.
According to industry insiders, Hyundai is losing ground on the home turf due to its high wage cost and low productivity structure.
The average Hyundai employee was paid 96 million won (US$86,659) last year, higher than that of global rivals such as Toyota and Volkswagen. Hyundai’s wage was also 3 million won higher than the average wage of employees at Korea’s largest companies.
Meanwhile, Hyundai’s hour-per-vehicle, an index measuring a carmaker’s productivity, came in at 26.8 hours for its Korean plants, twice as long on average than the US’ Alabama plant, which takes 14.7 hours to make a car, according to the automaker.
The HPV for Hyundai’s Czech Republic’s plant logged 15.3 hours, followed by Russian plant with 16.2 hours, Chinese plant with 17.7 hours, Brazilian plant with 20 hours, Indian plant with 20.7 hours and Turkish plant with 25 hours.
“In comparison to overseas plants, Hyundai’s domestic plants are far behind in terms of competitiveness,” an industry source said. “The workers’ demand for wage hike every year and the ongoing strike is worsening its competitive edge.”
Hyundai’s productivity level falls behind its global rivals as well. Toyota’s HPV stands at 24.1 hours, while General Motors logged 23.4 hours and Ford reported 31.3 hours, according to report by the Korea Automobiles Manufacturers Association.
In response, Hyundai Motor’s labor union said the data does not take each company’s different circumstances into account.
“If (Hyundai), in search of cheaper labor, expands into overseas markets, the development in the domestic market will decline, ultimately abandoning local consumers,” the labor union said.
Hyundai plans to open its fourth Chinese facility in Cangzhou by end of this year, followed by another plant in Chongqing next year. In total, the new facilities will add 600,000 units in annual production for the automaker, expected to further decrease its domestic share.
By Ahn Sung-mi (firstname.lastname@example.org)