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Hyundai Motor to build $270 million US engine plant

Hyundai Motor Co., South Korea’s biggest carmaker, will invest about €204.9  million ($270 million) to construct its second engine plant in the US as it and affiliate Kia Motors Corp. seek to double their market share by 2010.

The factory in Montgomery, Alabama will produce 2.4-liter engines for Hyundai Motor Co.’s assembly plant in the same town and for a Kia Motors Corp. plant under construction, the company said in a statement today. The Associated Press reported the plan earlier.

Hyundai Motor opened a $1.1 billion car factory in Montgomery in 2005 to raise sales in the world’s biggest auto market and lower the impact of currency fluctuations. Hyundai’s affiliate Kia is building a plant in West Point, Georgia, near Hyundai’s Alabama plant. „It has to raise engine capacity for Kia’s new plant,” said Cho In Karp, an analyst at Seoul Securities Co. who rates Hyundai „hold”.

„Kia will likely build similar models to those of its parent, so they can cut costs by sharing the basic architecture of vehicles.”  Hyundai Motor aims to produce 300,000 2.4-liter engines a year in the new plant for Sonata sedans and Santa Fe sport-utility vehicles, I.C. Kim of Hyundai Motor said in Montgomery today by phone.


The automaker also aims to raise its annual sales in the European Union by about half to 500,000 by 2011 as it opens a new plant and adds new models, it said in a separate statement today. The company is seeking to almost double its market share in the region to 4% in the period, it added.

Hyundai Motor plans to open a $1 billion car factory in the Czech Republic in 2008, following the opening of a Kia plant in Slovakia late last year. The carmaker last week unveiled the i30 compact hatchback, which is specifically designed for the European market, according to the company. The carmaker plans to sell 78,000 i30s this year, including 72,000 units for exports to Europe and other regions.

It doesn’t plan to sell the model in the US, the company said. The Czech plant will eventually make the i30 as well. The carmaker sold 334,000 vehicles in Western Europe last year, accounting for 2.1% of the market. Shares of Hyundai Motor fell 0.3% to 68,500 won at 12:33 p.m. in Seoul, while Kia shares dropped 1.2% to 12,300 won.


Kia began construction of its plant in Georgia in October, later than its initial plan after Chairman Chung Mong Koo was arrested and went on trial. On Feb. 5 Chung was found guilty on embezzlement and breach of duties and received a three-year prison term. He remains free on bail during his appeal. The two carmakers aim to double their market share in the US to 8.6% and sell 1.65 million cars in the world’s biggest automobile market in 2010.

Hyundai Motor plans to sell 1 million vehicles, with Kia Motors aiming to sell 650,000 vehicles. The new engine plant will create about 520 jobs once it begins production in September 2008, according to the statement. Hyundai Motor’s existing engine plant in Montgomery makes 3.3-liter engines for Sonata midsize sedans and Santa Fe sport-utility vehicles. (Bloomberg)