S. Korea's Hyundai Challenges U.S. Carmakers

U.S. automakers are facing many challenges, including foreign competition. But it's not just from Japan and Europe. There's fierce competition coming from South Korea too. And it's being felt in unexpected places, such as Alabama, where a billion-dollar Hyundai plant recently opened. Tonya Ott of member station WBHM reports. This story is the third in a series on the U.S. auto industry.

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RENEE MONTAGNE, host:

Time now for business news.

This week, we've been examining the plight of the American auto industry. Detroit faces many challenges, including foreign competition and not just from Japan and Europe. There's fierce competition coming from challengers like South Korea, competition being felt in unexpected places, Alabama for one, where a billion-dollar Hyundai plant recently opened. From member station WBHM in Birmingham, Tanya Ott reports.

TANYA OTT reporting:

Back when the steel industry was an economic force in Birmingham, there was little question what car to buy. Good Alabamians bought good American vehicles made with American steel, but now that steel is a small part of the local economy, there's a lot more ambiguity on the car lot.

Unidentified Man #1: Now, see, the first thing we do is get these in as part of the inspection process because they're going to steam-clean the engine so that we can easily see any kind of oil or transmission fluid leaks.

Mr. PRESTON WILSON: My name is Preston Wilson. I'm a Reservist. So I would probably buy domestic trucks and the Dodge Ram, the Chevy and the Ford are all good, tough trucks. They have been proven over the years to stand up.

Mr. MARK MANDONA(ph): Mark Mandona. I bought a 2001 Nissan Pathfinder. You know, I'm very happy with it. They hold their value, trade-in and whatnot a little better than some American cars. So I guess from a consumer point of view, a foreign car may sound a little better to buy.

OTT: Sales of foreign imports in the US are surging as domestic sales flag. Earnings from SUVs and trucks, traditionally a big source of profits for Detroit, have been falling. The drama of the auto industry plays out at Barry Buckner's car dealership in Tuscaloosa, Alabama. Buckner grew up in the car business. He was just 14 when he started working at his dad's Chevy dealership back in the '60s. At that time, American cars ruled.

Mr. BARRY BUCKNER: My father told me when they came and they asked him did he want to have a Honda franchise, and, you know, my dad just kind of ran in my other showroom. He says that was a multimillion-dollar mistake.

OTT: Twenty-four years ago, Buckner opened his own Oldsmobile dealership and business was good until December 12th, 2000, when General Motors announced it was going to phase out the Oldsmobile. On this day, a GM contractor is up on the roof of Buckner's showroom, tools in hand.

Mr. BUCKNER: He's taking down the GM satellite.

OTT: Does it kind of feel like the end of an era if, you know, the machinery's being taken out this week, the sign's going to come down?

Mr. BUCKNER: No, it's--I went through that four and a half years ago. I went through feeling bad, and I'm ready for--all the signs are supposed to come down in the next couple of weeks. We're looking forward to replacing our General Motors sign with our Hyundai sign.

OTT: Buckner is a sign of the times, moving from the now-defunct Oldsmobile to Hyundai. Last week, the Korean automaker opened its first US manufacturing plant in Montgomery, Alabama, to much fanfare.

(Soundbite of band)

OTT: The Korean national anthem plays to thousands of plant workers, dignitaries and other invited guests assembled under a tent.

Mr. M.H. LEE (President, Hyundai Motor Manufacturing Alabama): Good morning, ladies and gentlemen. Today, after three years of the construction and the country's hours of a pre-production testing, HMMA is obviously opened for business.

(Soundbite of applause)

OTT: Hyundai Motor Manufacturing Alabama President M.H. Lee.

(Soundbite from plant)

OTT: Just five years ago, the Koreans rated poorly on quality and performance, but Hyundai has made big strides. Consumer Reports recently named Hyundai's Sonata sedan the most reliable car in the United States in 2004. Hyundai sales in the US have more than quadrupled in the past six years and they're likely to increase a lot more when the new plant is in full gear. The plant is one of the most automated in the world.

(Soundbite from plant)

OTT: In the welding shop, more than 250 robots move material, weld and seal, converting stamped steel into stripped down vehicles.

Unidentified Man #2: We install just under 2,000 welds with our robots in this department, and overall, there are just over 6,000 welds altogether on the vehicle.

OTT: The paint shop is also 100 percent automated. Automation isn't the only advantage Hyundai brings to the global auto battle. It also benefits from setting up shop in a right-to-work state like Alabama. Hyundai's starting wages are about the same as unionized workers at GM or Ford, but University of Alabama auto industry expert Jim Cashman says a non-unionized work force pays off for the company in flexibility.

Mr. JIM CASHMAN (Industry Expert): You can expect more and demand more of a work force that is not organized as opposed to one that is. You can do so faster, easier. I think it has less to do with dollars and more to do with the capability of continuing to adapt and to shift.

OTT: Foreign automakers have opened plants throughout the southern US. Hyundai invested $1.1 billion in its new Alabama plant, hiring some 2,000 local workers. Alabama is also home to Mercedes and Honda. Nissan and Toyota also have a presence in the South. Auto analysts say this could make foreign cars even more attractive in the region. GM and Ford are watching the Hyundai plant closely. The opening last week included appearances by some high-profile folks, including former President Bush who was invited by a friend to the opening ceremony.

Former President GEORGE BUSH: You know, back when I was president, I worked with like-minded public servants to help open the global market because of days like today. And simply put, I was convinced that there would not be a giant sucking sound of jobs leaving the country. Quite the contrary. I believe that more companies like Hyundai would come here and have access to the most advanced economy and the best work force anywhere in the entire world. Of course...

(Soundbite of applause)

OTT: That's not to say that Hyundai and other foreign producers have an easy ride in the US. One big challenge is producing high-quality vehicles without raising prices. There's a Korean proverb: If you want to catch a tiger, you have to go to the tiger's cave. It means if you want to achieve a goal, you have to go to the source, work hard and overcome difficulties. A new difficulty may be looming soon for both the US automakers and the Koreans. A little known Chinese automaker, Cherry Automobile, plans to ship low-cost sedans and SUVs to the US in the next few years.

For NPR News, I'm Tanya Ott in Birmingham, Alabama.

MONTAGNE: This is MORNING EDITION from NPR News. I'm Renee Montagne.

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