Hyundai’s Swift Growth Lifts Alabama’s Economy

MONTGOMERY, Ala. — Few people in this city 800 miles south of Detroit cared much about the auto industry until Hyundai announced it would build cars here nine years ago.

These days, Montgomery cannot stop talking about it.

Hyundai and its sister company, Kia, which opened a plant last year just across the Georgia state line, have brought thousands of well-paying jobs to the region and even helped nurture a little Korean culture in Montgomery, the first capital of the old Confederacy. Hyundai is running its Montgomery plant almost nonstop. Rarely do more than a few weeks pass without word that another parts supplier has dozens of new positions to fill, typically offering good benefits and double the pay that the average Alabaman earns.

Hyundai, which will observe its 25th anniversary selling vehicles to American drivers on Sunday, was little more than an ambitious, second-tier brand when it chose to build its first United States car factory just south of Montgomery. But during the recent recession, the South Korean company thrived as Americans sought out cheap cars just as Hyundais were improving in quality.

In 2010, Hyundai and Kia each posted their highest sales in the United States and, taken together, surged ahead of Ford Motor to become fourth-largest automaker worldwide. Hyundai built 300,000 cars in Montgomery last year and sold most of them in the United States.

“If folks looked deeply at how far we’ve gone so quickly, from having no U.S. production five years ago to where we are today, it’s amazing,” John Krafcik, chief executive of Hyundai Motor America, said. “I don’t know that any company has gotten to such a high level of local assembly as Hyundai that fast.”

While Michigan’s dependence on the auto industry caused it to have one of the nation highest unemployment rates in recent years, the presence of Hyundai and Kia has helped Alabama keep its jobless rate among the lowest in the Southeast even as textile mills continue to close.

“As far as the pay, nobody else around here can compete with them,” said Richard Watson, a former auto mechanic who was out of work for a year and a half before getting a temporary job at the Kia plant in West Point, Ga., last fall. He said some of his co-workers drove two hours each way because the plant’s jobs were in such demand.

Hyundai is running its Montgomery plant, which employs 2,650, around the clock on weekdays and occasional Saturdays to keep up with demand. Last summer, it moved production of its Santa Fe sport utility vehicle 95 miles northeast to the Kia plant to free capacity in Montgomery. Kia recently hired 600 additional workers to operate a second shift for the Santa Fe and plans a third, with 1,000 more jobs.

Both carmakers expect to easily top their 2010 sales in the United States this year. Hyundai’s sales were up 22 percent in January; Kia’s rose 25.6 percent, the highest among the industry’s larger players. Together, the two sold more than 65,000 vehicles, about 5,000 short of surpassing Chrysler.

Hyundai makes its own engines in Montgomery, and transmissions for its cars come from a Hyundai-owned company, Powertech, which is attached to the Kia plant. Alabama lists 138 suppliers that support the Hyundai plant, directly or indirectly. (Some also do business with the Honda and Mercedes plants near Birmingham and the Toyota engine plant in Huntsville.)

“These jobs have good salaries and good fringe benefits, and are more self-fulfilling” than the ones that have left the area, said Seth Hammett, director of the Alabama Development Office. “The automobile business has really been good for Alabama.”

More than 50 companies have followed Hyundai to the Montgomery area from Korea, with executives and their families in tow. The city’s Korean population has jumped from about 100 before Hyundai to more than 3,000 today, said Su Yong Sim, president of the Korean-American Association of Greater Montgomery and a contractor who moved from Houston to help build part of the Hyundai plant.

About 10 Korean restaurants, a dozen Korean churches and a few small grocery stores like the Seoul Market, which stocks items as diverse as dried anchovies and toothpaste from Korea, have sprouted around town.

Jeannie Park, who opened a hair salon after moving here from Atlanta two years ago, sees a steady stream of female customers during the week, and men jam the shop on the weekends. She admitted that Montgomery lacked some of the excitement she was used to, but that the more Koreans move to town, the more she feels at home.

“It’s more of a community here,” she said.

In West Point, Ga., where the Kia plant sits on a former cow pasture, a sushi restaurant has opened among the 19th century storefronts downtown, and a former Pizza Hut across the Chattahoochee River is now the Korean BBQ House.

Kia arrived in West Point as the area was reeling from the closure of 12 textile mills that had formed the economic base for decades. After the mills sent their work to India and China, Kia moved in, offering better pay and benefits.