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For Hyundai, Korean factory footprint becomes a millstone
Monday, March 03, 2014

Hyunjoo Jin

Miyoung Kim

SEOUL (Reuters) -- It takes twice as long on average -- over 28 hours -- for Hyundai Motor Co. to make a car in South Korea than in the United States, even though its domestic plants have far more workers for each production line.

Add in high wages, frequent work stoppages and outdated facilities, and Hyundai's hourly labor costs per worker in South Korea, at 24,778 won ($22.26), are 16 percent higher than at its U.S. factories, and triple what they are in China.

Its seven domestic plants have helped drive Hyundai to become the world's fifth-largest auto manufacturer, but are now a legacy asset that need to be addressed to sustain profit growth.

It may make more sense, economically, for the company to close a plant it built 45 years ago -- one of five in Ulsan -- that is now its oldest and costliest facility.

But Hyundai says it won't give up its Korean base -- much as Toyota Motor Corp. rejects the idea of stopping production in Japan -- and says that fixing productivity issues with its strong domestic union is a top priority.

"People ask us why we don't just produce overseas, given all the labor troubles at home. But our home market is our root and the base for our growth overseas. And there's a risk in building cars overseas," said a Hyundai executive from the team that manages its labor relations.

On Saturday, Hyundai's labor union elected Lee Kyung-hoon, a moderate, as its new president, suggesting a period of steadier industrial relations after the 46,000-strong union, under more militant leadership, staged two strikes in two years. Lee's previous stint as Hyundai's union boss, from late-2009 to 2011, was strike-free.

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