Hyundai: We're as American as anyone

By Peter Valdes-Dapena, senior writer


NEW YORK (CNNMoney.com) -- Correction: An earlier version of this article reported that Hyundai Motor America CEO John Krafcik had said that by next year about 80% of the vehicles the Korean automaker Hyundai sells in the United States will be built in the United States.

In fact, the article's main assertion was incorrect because the reporter misunderstood what Krafcik meant.

Some of the vehicles that Hyundai builds in the U.S. are exported, a factor not taken into consideration when the story was prepared. So the actual percentage of made-in-America vehicles sold in the U.S. will be smaller than 80%.

A corrected version of the article appears below.

Hyundai has been on a tear lately. Besides racking up awards, it was one of the very few automakers to manage a sales increase in 2009. Last month, sales were up again -- by nearly half from the year before.

But Hyundai isn't worried about a "Buy American" backlash in the wake of the automaker's progress, CEO John Krafcik told CNNMoney recently. Hyundai is committed to making cars in America, he said.

Hyundai plans to move production of its popular Elantra compact car from Korea to the automaker's Montgomery, Ala., plant later this year.

"I'm going to build my three best selling cars in the U.S.," Krafcik said. "Ford builds its best selling car in Mexico."

He was referring to the Ford Fusion mid-sized sedan, which is Ford's most popular passenger car.

Hyundai's three best sellers are the Elantra, the Sonata mid-sized sedan and the Santa Fe SUV. Together, they now make up more than half of Hyundai's U.S. sales.

Because new versions of both the Elantra and Santa Fe will be released soon, an increase in sales of both models is expected. Once all three models are produced in the United States, Hyundai executives expect that a significant majority of Hyundai's sales in this country will be of American-made cars.

Hyundai will still import many cars, however, while, at the same time, exporting some U.S.-made cars to Canada and Guam.

Besides being assembled here, the Sonata, Hyundai's best seller, was designed and engineered in the United States, Krafcik pointed out, and most of its parts, including the engine, are built in the United States. He contrasted that to Ford's Fusion which, besides being built in Mexico, is based largely on engineering from Mazda of Japan.

"It's a global industry," Krafcik said.

Like Hyundai, Ford not only imports cars built in other countries, like Mexico, it also exports many cars it builds here. In the end, Ford builds nearly as many cars in the United States as it sells here, according to a tally of estimated September production at Ford's U.S. plants.

Ford is also "in-sourcing" more manufacturing jobs, said spokesman John Stoll, bringing thousands of jobs back to the United States as it works with the United Autoworkers Union to make its older plants more competitive.

Ford is not bothered that Hyundai is boasting of its U.S. production plans, Stoll said.

"I think we're encouraged that, overall, American manufacturing is competitive," said Stoll.

Even after bringing Elantra production to the United States, Hyundai's U.S. production will still pale in comparison to that of major domestic automakers like General Motors and Ford.

For instance, based on production figures for September, Ford's U.S. factories turn out almost half as many cars in a month as Hyundai could produce in a year.

Also, production figures like these deal only with "final assembly." In the case of Chrysler, for instance, engines and transmissions for many of the cars it assembles in Canada are built in U.S. factories and shipped north.

At most major automakers, components and parts move back and forth among Canada, Mexico and the United States, making it difficult to point to one place where a car is "built."

It's not about PR, it's about the dollar. For foreign automakers, making cars in the United States provides two big benefits.

For one, it protects them against changes in the value of their own currency relative to the dollar. Paying to build cars in South Korean won and then selling them in U.S. dollars can be difficult if the dollar loses value against the won.

Second, making cars in the United States makes it easier to adjust to rapid shifts in consumer demands.

If U.S. gas prices shoot up and car buyers start demanding more Elantra's and fewer Sonatas, production can be shifted and deliveries to dealers can start almost immediately. Not so when factories are an ocean away. To top of page

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