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Kia's new U.S. plant is no windfall for U.S. suppliers

Lindsay Chappell | | Automotive News / April 3, 2006 - 6:00 am

When Kia Motors Corp. opens its $1.2 billion vehicle assembly plant in Georgia in 2009, the largest companies supplying the parts are more likely to be named Mobis or Dongwon than Magna or Dana.

Instead of looking for new suppliers in the United States, Kia will piggyback onto the largely Korean supply chain that opened last year in Alabama to serve Kia's sister company, Hyundai Motor Co.

Kia has told Georgia officials that it envisions only five or six new supplier plants being necessary to support the Georgia auto plant.

U.S. companies have reason to compete for Korean business. When Kia opens the assembly plant the combined U.S. output of the two Korean affiliates will reach 600,000 vehicles a year. That would help some companies offset lost production from General Motors and Ford Motor Co., which together plan to close 26 North American plants over the next six years.

Alabama economic development officials say privately that some supplier plants there already have been told to expand for the project in Georgia. Kia will build its factory only 90 miles from Hyundai's plant in Montgomery, Ala., just two miles across the Georgia line.

"It's pretty clear that Kia sees an efficiency of scale in just using the supply chain Hyundai has already created," says Mike Wall, an analyst with CSM Worldwide in suburban Detroit. "But we've been telling U.S. suppliers that there is still some opportunity in this deal. Not as Tier 1 suppliers, but in trying to work with the Tier 1s that are operating in Alabama."

Salivating suppliers

For a select few U.S. companies, the outlook is promising. "We'd never be so cocky as to believe the business is in the bag, but we do have a good leg up," says Frank Pierce, vice president of North American sales and marketing for ArvinMeritor Inc.

Last year the suburban Detroit exhaust and chassis supplier opened two Alabama plants to supply Hyundai, one of them a joint venture with Korea's Sejong Industrial Co.

"We don't know yet what the opportunity will be for us at Kia, but we're talking to both Kia and Hyundai in Korea," Pierce said. "We're part of their sourcing strategy, but it's by no means a gimme."

Other North American companies that already are part of the Hyundai chain include interior parts makers Lear Corp. and Johnson Controls Inc. and wheel assembler T&WA Inc.

But the rest of the U.S. parts industry will find Kia in little mood to take on the unnecessary risk of unfamiliar suppliers. Erecting a full-scale auto plant in a new market with new workers will be risky enough.

Officials who worked with Kia to pick its Georgia site say Kia wanted to be near Hyundai's Alabama suppliers. Kia's plant will be almost a replica of Hyundai's Montgomery plant.

Kia's Mister Fixit

To oversee the project, Kia relied on the closest thing it has in North America to a seasoned veteran: Ahn Byung Mo. It was Ahn, the 1990s president and CEO of Kia Motors America, who was dispatched by Hyundai Chairman Chung Mong Koo to find a plant site for Hyundai in Alabama. Hyundai and Kia are both owned by Korea's Hyundai Automotive Group.

Just before the Hyundai plant in Alabama began production last year, Ahn again quietly disappeared with no explanation. Unbeknownst to his U.S. colleagues, he was chosen to lead Hyundai's second U.S. investment: a twin Kia factory.

Reserved and soft-spoken, Ahn is in some ways the typical Hyundai Group Korean executive. He avoids the press, sidesteps public events and discourages invitations to speak.

During the construction of the Hyundai plant in Montgomery, where he surprised many by taking the No. 2 position of executive vice president, he routinely declined invitations from eager city officials to speak about the project. During the Kia plant site search, he sometimes dispersed welcoming committees in favor of small one-on-one meetings.

But it was clear to many that when it came to making decisions, he represented the chairman. Site officials say that Ahn himself discovered the Kia factory location in West Point while driving from the Montgomery factory to Atlanta, 150 miles away.

In the end, it would be Ahn's site that Georgia packaged and delivered, with state and local incentives of more than $400 million.

Like the Alabama Hyundai plant, Kia's plant will have two vehicle production lines and an engine plant. It will rely heavily on automation and buy large component modules mostly from established Korean suppliers.

Though barely known in North America, the diversified Mobis is one of the world's largest auto parts producers. Its 2005 revenues topped $7.70 billion, and the company is forecasting sales this year of $8.32 billion.

Kia owns an 18.2 percent stake in Mobis, and Mobis in turn owns 14.6 percent of Hyundai Motor Co. In a regulatory filing in Korea last year, Hyundai said it also is studying a plan to acquire Mando Corp., Korea's No. 2 parts maker. Mando supplies brakes to the Alabama plant.

Hyundai's startup launched a supply chain of 35 parts plants in Alabama, most of them Korean-owned or Korean joint ventures with U.S or European companies. Among those: a Mobis-owned cockpit module plant, a door systems plant operated by Dongwon Autopart Technology, and a tailgate and hood supplier, SMART LLC.

One new local supplier, according to a Georgia official who worked on the project, will be a large logistics plant that will sequence incoming parts for delivery to the Kia production line.

Kia has not chosen a logistics company, but odds are good that it will be Seo Jee-yeon Glovis. Glovis is a Hyundai-owned logistics firm that Chairman Chung's son, Chung Eui-son, took public on the South Korean stock market in December. The company already operates two logistics and warehouse buildings for the Hyundai plant in Alabama, employing about 400 people.

The younger Chung, who is both president of Kia and the largest shareholder in Glovis, has handled many of the details for the Georgia auto plant. It was he who signed the documents to make the new U.S. investment official this month in Seoul with his father attending.

Link: http://www.autonews.com/apps/pbcs.dll/arti...E/60331076/1003

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Groundbreaking for KIA Plant Delayed

(WSB Radio) -- WSB News has learned that the ground breaking for the new KIA plant to be located in Troup County has been delayed.

Bert Brantley with the Georgia Department of Economic Development tells WSB's Jeff Dantre' the company asked state officials to postpone the ceremony scheduled for April 26th. The exact cause for the delay is unknown

Right now, KIA's parent company, Hyundai, is undergoing a crisis. South Korean regulators raided Hyundai's offices in that country Sunday looking for evidence that company executives bribed government officials in that country related to construction projects.

Brantley says the state has been assured that the investigation in South Korea has nothing to do with the proposed Georgia plant. "The construction they're talking about is construction on the expansion of their headquarters in Korea," says Brantley.

"When they asked us to delay the groundbreaking, our main concern was to make sure the project was moving forward. They said it was and there was no concern at all with the project."

http://wsbradio.com/news/040406kia.html

Edited by Derek77

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>>"Kia has told Georgia officials that it envisions only five or six new supplier plants being necessary to support the Georgia auto plant."<<

First off, can there actually be demand enough in NA sales to support a kia plant here??? These are the LCD of the automobile world- who's buying these POSs?

2nd- I hope to hell and back that Georgia will charge a billion-dollar licensing ('Right-To-Pilage') fee and apply the full commercial-rate tax bill on the factory-to-be, in addition to charging going rate for all permits & fees.

You'd have to be a born-yesterday infant not to realize these import companies are riding a tsunami of good will and will make cargo vessels of cash- they will pay to play to get a greasy foot into the U.S market.

What's that?? ...not gonna happen? What a f**king shock.

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I hate to say this, but in some areas Kia and Hyundai are strong players. I see them everywhere in the Toronto area. Little crappy Hyundai stores with only room for 4 cars in the show room are selling 200 cars a month - more than any GM stores are in this area!

Part of the problem GM is facing is that GM is getting squeezed at the low end of the price scale by the Koreans and at the high end of the price scale by the Europeans. In big cities where extremes of income tend to be the case and where transient (immigrant) populations tend to be more common, GM is getting its ass kicked.

600,000 capacity is only more bad news. Too bad Korea and Japan are closed economies.

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\.  Too bad Korea and Japan are closed economies.

Not all that closed really. Until a month ago how many of these Japanesse and Korean car manuacturers did GM and Ford own. The third largest selling Japanesse name plate in North America is actually French.

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What do you expect? Many of those foreign cars "built in America", are actually just snapped together here like lego pieces from high value parts like engines and transmissions that are assembled overseas.

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What do you expect?  Many of those foreign cars "built in America", are actually just snapped together here like lego pieces from high value parts like engines and transmissions that are assembled overseas.

Yea that explains why the latest rounds of Toyotas and Hondas have 70+% North American content and vehicles like the GMT800s utes and Equinox are in the low 60% or below.

Edited by evok

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Yea that explains why the latest rounds of Toyotas and Hondas have 70+% North American content and vehicles like the GMT800s utes and Equinox are in the low 60% or below.

Every time with the Equinox. What about the rest of the whole freakin line of vehicles??

You bring up the couple Japanese vehicles with high domestic content, and the one GM with low domestic content......and somehow that tranlates (in your mind, and the US public to some degree) that right now the Japanese use and hire more American workers than the Big 3. That argument is ludicrous. :alcoholic:

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Every time with the Equinox.  What about the rest of the whole freakin line of vehicles??

You bring up the couple Japanese vehicles with high domestic content, and the one GM with low domestic content......and somehow that tranlates (in your mind, and the US public to some degree) that right now the Japanese use and hire more American workers than the Big 3.  That argument is ludicrous.   :alcoholic:

OK big mouth - show me some data already. You continue to throw stones but your arguments as usual continue to be unsupported. Put up some data, prove me wrong.

Hell the Toyota Sienna has a hell a lot more NA content (90+%) and is built in the US. That is more than can be said for the Chrysler LX cars.

Get your facts straight.

And BTW Chrysler Group is part of a German company called Daimler Chrysler.

Give me a break!

And let me add, the Ford Fusion/Milan/Zephyr are 30%.

Edited by evok

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Over 90% of the parts for the Kentucky plant (Camry and related vehicles) are built less than one days drive from the factory. I think that means mostly Ohio, Indiana, etc. Another 5% of the parts cme from long term suppliers in California.

Another point is that Toyota builds a larger percentage of its parts in house than do most other manufacturers.

Furthermore, you know Chrysler imports the most of? Want to know how to get a job at Chrysler? Just put on the Toyota polo shirt and there isn't enough Chrysler can do for you.

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OK big mouth - show me some data already.  You continue to throw stones but your arguments as usual continue to be unsupported.  Put up some data, prove me wrong.

Hell the Toyota Sienna has a hell a lot more NA content (90+%) and is built in the US.  That is more than can be said for the Chrysler LX cars.

Get your facts straight.

And BTW Chrysler Group is part of a German company called Daimler Chrysler. 

Give me a break!

And let me add, the Ford Fusion/Milan/Zephyr are 30%.

:pokeowned:

“I actually went out and we had to call Toyota PR to find out what the percentage is on the Avalon for the '04 ,and it's 75 percent, apparently," said Scheele. "The percentage for the Explorer for 2004 is, in fact, 85 percent.

“I think more significantly, perhaps, if you look at the sales-weighted average, that is all vehicles multiplied by the domestic content that they have for Toyota and Ford, for Ford it is 85 percent for all of our vehicles, for Toyota and Lexus it's 35.8 percent.

Scheele noted that the Explorer has far more domestic content if the intellectual capital that goes into the design and development of a vehicle is counted. Additionally, American Automobile Labeling Act indicates Explorer was 75 percent domestic content in 2003 compared to Avalon’s 70 percent.

Toyota's overall percentage is still only 35.8%........FACT :pbjtime:

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OK big mouth - show me some data already.  You continue to throw stones but your arguments as usual continue to be unsupported.  Put up some data, prove me wrong.

Hell the Toyota Sienna has a hell a lot more NA content (90+%) and is built in the US.  That is more than can be said for the Chrysler LX cars.

Get your facts straight.

And BTW Chrysler Group is part of a German company called Daimler Chrysler. 

Give me a break!

And let me add, the Ford Fusion/Milan/Zephyr are 30%.

More FACTS:

While Toyota is wrapping itself in the American flag with paid advertisements and help from our incompetent media, GM, Ford and Chrysler manufactured over 75 percent of all vehicles built in the U.S. last year. And their average domestic content is 82 percent. Toyota's is 40 percent (Lexus is 3 percent). Every 100 GM, Ford or Chrysler vehicles produced in the U.S. supports the livelihood of 23 full-time workers. Conversely, every point share gained by Toyota represents 18,000 lost American jobs and countless profit dollars that are shipped overseas to Japan.

:pokeowned::pokeowned:

Note, the difference in Toyota's percentages is because the articles were written a couple years apart.....still FACTUAL DATA though!

Edited by BrewSwillis

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:pokeowned:

Toyota's overall percentage is still only 35.8%........FACT  :pbjtime:

Your facts are old.

For the year end results for the 2005 MY

Ford (traditional US) and Toyotas corporate (all brands) sales weighted average are as follow:

2005CY sales including 2006 MY vehicles.

Ford drops to 82% (Ford's number is your post conveniently leave out PAG)

Toyota Rises to 50%

GM is about 80% for reference.

Fords number will drop further (below 80) as the sales for the Fusion and the cousin increase and the Taurus is phase out.

That number also excludes Ford's foreign brands (Volvo, Land Rover, Jaguar) which would drop Fords number for the 2005 CY close to 73%.

You argument looses its merit because this discussion is about transplants and those vehicle produced by transplants in the US have a higher US/Canada content. Toyota's corporate number will increase with their new US operations.

So your argument is again pointless because the traditional US brands are reducing their US content while the Asia's are increasing theirs as their operation shift to NA production.

Toyota's transplant operation uses app. 70% NA sourced content as a sale weighted average.

So get your facts straight as it pertains to this Kia discussion.

Edited by evok

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I'm not sure why you would include the lexus brand in your arguement and not include the comparable Land Rover, Volvo, Ason Martin, Jaguar and other 0% North American content Ford products.

edited to include my automotive purchases for the last 20 so years. 2006 Saturn ION, 1999 Pontiac Grand AM, 1996 GMC Sonoma, 1994 Chevy Cavelier, 1994 Saturn SL2, 1992 Chevy P30. Hardly the record of a Toyota fan/US domesitc brand hater.

Edited by haypops

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More FACTS:

:pokeowned:  :pokeowned:

Note, the difference in Toyota's percentages is because the articles were written a couple years apart.....still FACTUAL DATA though!

That is just propaganda because it excludes the fact GM, Ford and even the domestic operations of DAIMLERchrysler are overstaffed because of contract obligations.

And if I remember correctly that came from a GM presentation.

Edited by evok

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That is just propaganda because it excludes the fact GM, Ford and even the domestic operations of DAIMLERchrysler are overstaffed because of contract obligations.

And if I remember correctly that came from a GM presentation.

:lol: A guy supporting Toyota is complaining about Big 3 "propaganda" !!

You can pick and choose all you want, but the Toyota number of 35.8% includes Lexus, which they sell a shiat load of here. So what if the few vehicles they build here have a high domestic content......it doesn't do much for the overall picture. It's a percentage, not overall volume. If Toyota sells 100,000 vehicles with 70% domestic content and GM sells 1,000,000 vehicles with 65% domestic content........which is better for America??

Edited by BrewSwillis

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:lol:   A guy supporting Toyota is complaining about Big 3 "propaganda" !!

You can pick and choose all you want, but the Toyota number of 35.8% includes Lexus, which they sell a shiat load of here.  So what if the few vehicles they build here have a high domestic content......it doesn't do much for the overall picture.  It's a percentage, not overall volume.  If Toyota sells 100,000 vehicles with 70% domestic content and GM sells 1,000,000 vehicles with 65% domestic content........which is better for America??

See my earlier post. It appears missed it or purposely ignored it.

Updated data is available and posted. Your numbers are old and posts off topic with regard to the Kia plant and US/Canadian content of vehicle built at transplant facilities.

You have no point as it applies to this discussion.

Edited by evok

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My earlier remark about Japan and Korea being "closed" economies still stands. It is virtually impossible for an American or other non-Asian company to outright BUY or otherwise OWN a Japanese or Korean company.

Toyota is 100% owned by Toyota in JAPAN. Ford may own PART of Mazda and GM may own PART of Daewoo, but nobody outside those closed economies owns OUTRIGHT any of those companies. Mercedes can walk in and buy out Chrysler because we are in an "open" market.

Toys R Us was even forced into a "partnership" to get into Japan.

Hardly the stuff of a free market economy.

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