Hyundai hints it may return to Canada... someday
Published on Friday, February 5, 2010
It could be economically viable for Hyundai to build cars in Canada again in less than 10 years if the South Korean automaker continues to meet its sales expectations, says the president and CEO of Hyundai Auto Canada Corp.
"If we hit our sales numbers that we think we're going to five years, six, seven years down the road, then I think it becomes economically viable to put a plant in Canada as it was for Toyota and Honda,' Steve Kelleher said in an interview Wednesday.
Hyundai had a factory in Bromont, Que., from 1988 until 1994, when it was shuttered. Kelleher acknowledged opening a plant in Canada at the time was a "bad decision for us.'
"There wasn't the volume in North America to support a plant, let alone the volume in Canada and we learned from that,' he said.
But Hyundai isn't the same company it was 20 years ago. It first entered the North American market in 1986 with its Excel sedan, which sold at the time for under US$5,000. It was a success due to its remarkably low price tag, but buyers soon discovered they were getting what they paid for.
Hyundai quickly developed a reputation as a poor-quality automaker and its sales plummeted when the recession of the early '90s hit, forcing it to close its assembly plant in Bromont, east of Montreal.
"When we started doing business in Canada, we were kind of looked upon as the cheap, cheerful manufacturer, not really known for product quality,' Kelleher said.
This all changed in 1999 when Chung Mong Koo took over as chairman of the automaker and decided to shift the company's focus from ``sales growth at any expense' to quality.
This was a short-term-pain-for-long-term-gain move for Hyundai. The automaker's global sales suffered for years as it delayed product launches to ensure the quality of its new vehicles was impeccable.
``That was a very painful experience for us but one that we knew we had to do, because without that quality, you're never going to get the consumer to really perceive your product or your brand as something that they aspire to,' Kelleher said.
The focus on quality eventually paid off, and Hyundai has seen its Canadian market share soar in recent years to the point where it is competing directly with Honda for fifth place - a position that would have been unthinkable 10 years ago.
Hyundai made 7.1 per cent of the vehicles bought in Canada in 2009, up more than two percentage points from 4.9 per cent in 2008, and exceeded 100,000 vehicles sold for the first time in its history. In January, the automaker sold 6,084 vehicles to capture 7.5 per cent of the Canadian market. By comparison, Honda's market share was 7.9 per cent, including its luxury Acura division.
Kelleher said the recession was a huge boon for Hyundai, as its vehicles are still much cheaper than many of its competitors' offerings, and Canadians turned to the automaker in droves as they looked for deals in a period of economic uncertainty.
Hyundai Auto Canada aims to sell 115,000 vehicles this year, nearly 12 per cent above last year's sales of 103,233.
"Our goal now is to step up one more rung on the ladder and try to go after Honda, and we think we have a good start to doing that,' Kelleher said.
If Hyundai can continue to gain market share in Canada - especially in the key compact market - this could prompt the company to start manufacturing vehicles here again, Kelleher said.
However, industry analyst Bill Pochiluk said he thinks this is unlikely given the company's existing plants in Montgomery, Ala., where it shares a supplier base with Kia.
"The current manufacturing base for Hyundai-Kia in the U.S. southeast and the footprint of the supply chain that they're building there would probably favour continued development of the southeast,' said Pochiluk, president of industry adviser AutomotiveCompass.
He added that it would probably take "substantial incentives' to convince Hyundai to open a plant in Canada.
General Motors, Chrysler, Ford (NYSE:F), Honda and Toyota all have manufacturing plants in Canada, all of which are located in southern Ontario.
Source : Canadian Press