SEOUL - The decision to establish a plant in the United States doesn't come without risk.
Some companies that Hyundai Motor Corp. invited to Alabama to supply its new U.S. assembly plant declined to go, says industry consultant Peter Underwood in Seoul.
Some were concerned about making a big investment that would be captive to one main customer. In some cases, they already had tried to crack the U.S. market but failed to win other contracts, Underwood says.
Says an industry insider: "It's very risky to invest in overseas countries without customers."
You also have to rely heavily on your own suppliers back in Korea, says another supplier source.
The Hyundai suppliers that have gone to Alabama are Tier 1 companies, the source says. To provide the low-cost structure the automaker wants, the suppliers must depend on their own Tier 2 suppliers to ship inexpensive components from Korea.
Another challenge for the new Korean suppliers in Alabama will be assembling parts cheaply in an environment where the cost structure is higher than in Korea.