MONTGOMERY, Ala. (Reuters) -- Hyundai Motor Co. will invest $173 million to expand and modify an engine plant in Alabama, the state said on Monday.
The expansion, which is expected to be completed in the autumn and start production in March 2012, will make the NU engine for the small Elantra sedan being produced at the automaker's Montgomery, Ala., plant.
The investment will create 214 new jobs, the state said.
The expansion would also boost production capacity for the company's Theta engine for the Hyundai Santa Fe and the Kia Sorrento models manufactured at the Kia Motors Corp. assembly plant at West Point, Ga. Kia is a Hyundai affiliate. "The enhancements to the engine plant will not only increase our engine capacity by 300,000 units per year, it will also provide us the opportunity to implement new manufacturing technologies," Hyundai Motor Manufacturing Alabama LLC CEO Deuk Lim said during a news conference today. The initiative also expands the capacity to build the Theta engine for the Hyundai midsize sedan Sonata.
Hyundai's U.S. sales are booming, with the Korean automaker the fastest growing major automaker in the U.S. market.
The Alabama plant makes two of the hottest selling cars in the U.S. market, the Sonata and the Elantra. Its assembly lines operate as much as 20 hours per day during weekdays and on some Saturdays to meet high demand.
In addition to today's announcement, a second Hyundai U.S. assembly plant could follow at some point.
A second plant?
Sources told Reuters that Hyundai in recent months has spoken at least informally with at least three U.S. states, including Alabama, about plans for a second plant in the southeast of the United States.
Officials in South Carolina and Mississippi expressed interest in luring the Korean automaker to place new production in those states, the sources added.
Hyundai Motor's chief financial officer, Lee Won-hee, said last month that the company could consider building another U.S. production plant if the market continued to improve, but that no formal plans are in place.
Hyundai's U.S. sales rose 31 percent in the first four months of 2011, boosted by a model lineup laden with fuel-efficient small cars as consumers seek vehicles that can help overcome gasoline prices that have risen above $4 per gallon in much of the country.
Hyundai's U.S. CEO, John Krafcik, earlier this year said the automaker's U.S. sales will be constrained by limits to its current production, but has not commented on any plans to expand the company's U.S. production.
Sources told Reuters that Hyundai is considering at some point placing a second assembly plant on the same site as its existing factory south of Montgomery.
Room to grow
The company owns about 1,750 acres (708 hectares) at its Alabama site, and its current assembly plant takes up less than a third of that land.
One source told Reuters that any new plant would produce a subcompact car, the size of the Hyundai Accent which is now imported to the United States.
Hyundai opened its Alabama plant in 2005. It was followed by dozens of Korean auto parts suppliers that also have production plants in Alabama to serve the Hyundai factory.
Alabama is a "right to work" state, which helps companies there fend off efforts to unionize workers. The UAW, which represents production workers at the three major U.S. automakers, has not been successful in convincing Hyundai workers to unionize the Alabama plant, which has about 2,600 workers.
Mississippi and South Carolina are also right to work states.
U.S. April sales of Hyundai increased 40 percent from April 2010, to 61,754 units, for a 4.8 percent share of the U.S. market. Through April, Hyundai's U.S. sales rose 31 percent to 204,374 units.
U.S. Sonata sales rose 46 percent to 73,616 in 2011 through April, while U.S. April sales of Elantra were up 129 percent and up 89 percent in 2011 through April.
Hyundai said the vehicles it sold in the United States in April averaged 36.2 miles per gallon, and that vehicles that can average 40 miles per gallon on the highway made up 34 percent of its April sales, up from 25 percent in April 2010.
