Hyundai CEO wants Canadian car plant

LUCAS OLENIUK/TORONTO STAR

Hyundai Canada chief Steve Kelleher says the carmaker may need to take a "hard look" at opening an assembly plant here.

Tony Van Alphen

BUSINESS REPORTER

Korean auto giant Hyundai Motor Co. will need to take "a hard look" at opening an assembly plant here again if it continues hitting ambitious sales targets during the next few years, says the head of the company's Canadian subsidiary.

Steve Kelleher, president and chief executive officer of Hyundai Auto Canada, said late last week he is talking to top management in Korea about another plant in view of the company's soaring sales during a broad market slump.

Kelleher said in a wide-ranging interview that Hyundai is aiming for 150,000 annual sales by the end of 2012 – and reaching that goal should prompt serious consideration by the parent company for production here.

"I don't have a real firm number, but I've kind of got people listening to the idea that if we get to 150,000 vehicles annually in Canada in three years, we got to take another hard look at a plant here," Kelleher said.

The company made a major market splash in Canada in the mid-1980s and opened an assembly plant in Bromont, Que. in 1989. But it stopped car production more than four years later as sales crashed in North America.

Hyundai began a slow recovery in the late 1990s that has gained momentum in the last five years.

Sales in Canada are up a stunning 25 per cent during the first eight months of this year and are on pace to reach about 95,000 by the end of December for the first time. The company has posted record results for seven consecutive months and moved into sixth place in sales.

Industry watchers say a huge improvement in quality and wider selection of models plus aggressive pricing have fuelled the company's growth. Meanwhile, the overall auto market has plunged 15.5 per cent this year.

Sales for major players such as General Motors, Chrysler, Honda and Toyota are all down more than 20 per cent.

It marks one of the biggest performance gaps between one automaker and its rivals in Canadian auto industry.

Hyundai's market share has also increased, from a low of 1.4 per cent in 1997 to almost 7.5 per cent this year.

Hyundai's comeback has led to talk again about when the company would consider a return of production and become Canada's sixth automaker. GM, Ford, Chrysler, Toyota and Honda have operations here.

Nissan, whose fortunes in North America shot up earlier this decade, indicated the company would only consider production in Canada if it gained about 10 per cent of the market.

The company's sales including the luxury Infiniti brand have improved. but it still only holds about 5.5 per cent of the market here.

Kelleher said it is premature to talk about whether Hyundai would build a new assembly operation in Canada or take over an existing facility here. The company has sold the Bromont property.

Canada has eight light vehicle assembly plants, all in southern Ontario, but output has dropped in the last year because of the recession. General Motors closed a truck plant in Oshawa this year and Ford has no plans to build cars at an operation in St.Thomas after 2011.

Chris Travell, vice-president of the automotive practice at Maritz Research, said there is a tendency for automakers to locate new assembly plants in regions where they already have operations because of the proximity of the existing supplier base.

"The wild card in all of this is government incentives that could swing a company on where to locate," he said.

Hyundai opened its first assembly plant in the U.S. in Alabama during 2005. Korean cousin Kia Motors, which Hyundai controls, is building an assembly plant in neighbouring Georgia.

The company arrived in Canada in 1984 and shocked the industry the following year with sales of almost 80,000 vehicles primarily on the strength of the boxy Pony compact, the market's cheapest car by a wide margin with a sticker price of $5,795.

The company had hit a home run with consumers who wanted inexpensive, basic transportation. There also wasn't a lot of competition in the compact market because North American automakers didn't make much money producing them.

But sales of the Pony and two other Hyundai models soon collapsed in North America because of consumer experiences of poor quality and unreliability. Hyundai's sales in Canada fell below 28,000 in 1988.

It only produced 25,920 vehicles in more than four years. But in the late 1990s, parent Hyundai Motor Co., under chairman Mong-Koo Chung realized the company needed to focus on quality to become an international player.

"He changed the culture of the company," said Kelleher, who joined Hyundai in 1986 and became chief executive in 2002.

The company introduced new models with a significant improvement in quality. However, sales didn't show signs of a recovery until 2000 and 2001.

Kelleher said a turning point for the company in Canada came when it rolled out the Sante Fe compact crossover utility vehicle in 2001.

The Sante Fe, the Accent subcompact, the Elantra compact and even the Elantra intermediate model fuelled a gradual increase in sales. The company now has a line-up of nine cars, minivans, crossovers and sport utility vehicles.

Hyundai has moved up in the initial quality rankings of leading researchers J.D. Power and Associates.

Earlier this year, the company jumped to fourth place, behind luxury nameplates Lexus, Porsche and Cadillac.

Last month, Hyundai became the first automaker to top up the federal government's scrappage program with a $1,000 offer for consumers. Kelleher said the company will get a further push with the introduction of its first hybrid model next year that uses lighter, smaller lithium polymer batteries.

"If we're not going to be first, we're going to be the leader in technology," he said.

"Our goal is to be the world's most environmentally efficient car maker in 2015."

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