YONGIN, South Korea -- Hyundai Motor Co.'s limited global production capacity is capping the company's growth, a top executive says.
The company is squeezing nearly every unit possible from its assembly plants, said Lee In-cheol, Hyundai's vice president of international sales.
"Without building a new factory, it is very, very difficult to supply more," he said. With existing plants, Hyundai can boost global output only 5 percent over current levels, Lee reckons.
But that's not a problem. In fact, Hyundai doesn't want to boost production -- at least not now, and not for developed markets such as North America.
The reason: Hyundai's strapped suppliers are unprepared to expand. So despite Hyundai's goal of achieving a U.S. market share of 5 percent, its share is poised to shrink.
The dilemma is exacerbated by a recent labor accord in South Korea that cut working hours and further crimps output.
"We are aiming for about 5 percent market share," Lee told Automotive News at a Hyundai training center outside Seoul. But he conceded, "At the moment, even though we are running at 100 percent of our production capacity, we are not supplying enough."
The issue is quality. Hyundai executives worry that suppliers will be unable to sustain quality standards if pressed to expand too quickly.
"We have to control our quality and our parts supply quality," Lee said. "In order to expand capacity, all of our parts suppliers need to have the same level of quality control.
"Then if they are ready, we will gradually expand capacity step by step," he said. "We don't always have to be the fastest-growing company. Quality management is our top priority."
Today, Korean suppliers such as Hyundai Mobis and Mando Corp. are international giants. But most of the country's parts makers were small and unknown until recently thrust onto the global stage by Hyundai's rapid rise.
For Hyundai executives, Toyota Motor Corp.'s 2009-10 recall fiasco is the ultimate cautionary tale about unbridled growth.