If I order GV80, I wait for 3 months… Sonata production plant with sluggish sales is shut down

Input 2020.12.24 06:00

Hyundai Motor’s rigid production method on the cutting board

Hyundai Motor Company (005380)Palisade, Genesis GV80, G80, etc., continue to have so-called’bottlenecks’, with a waiting period of 3 months before delivery of the vehicle after ordering, but the Asan plant, which produces the Sonata model, which has been sluggish in sales, has stopped operating.

It’s under one roof, but depending on the model it produces, some lines don’t keep up with demand even if workers work overtime, while others stop production to digest inventory. Hyundai Motor’s old production methods and vested union egoism lead to a production imbalance.

According to the industry, as of the end of December, the waiting period for major models of Hyundai Motor Company and Genesis is 2-3 months. The most representative models are popular models such as Hyundai Semi-Large Sports Utility Vehicle (SUV) Palisade, Genesis Semi-Large SUV GV80, and Large Sedan G80. Not only the GV80 released in January of this year, and the G80, which started to sell full-change (completely changed) models in March, as well as the Palisade two years after launch, have not solved the standby demand problem. In the case of Palisade, the waiting period has been greatly reduced as the Ulsan Plant 4 and Plant 2 introduced a flexible production system that produces parallel production.

The GV70, which started contract on the 22nd, is expected to be shipped sequentially from January, but the waiting period is expected to be longer as there is greater demand than the previously released GV80, with orders exceeding 10,000 units on the first day.

The prolonged waiting period was influenced by the strong enough domestic automobile sales this year to reach a record high. Although overall consumption was significantly stagnated due to the corona crisis, the government gave tax benefits to car buyers, such as lowering individual consumption tax, and the effect of releasing a large number of new cars by automakers also worked. Until last November, domestic car sales were 1.47 million7971 units, up 6.1% from the same period last year. Considering that December is the peak season for automobile sales to increase significantly, this year’s annual sales are expected to reach a record high (1.64 million units) recorded in 1996.

The problem is that Hyundai’s production capacity is too rigid to respond to increased demand. Each production line of Hyundai Motors produces only a set model, and even if demand for that model increases, it is virtually impossible to increase production immediately. Because automobiles are produced in a batch assembly method in Korea, it takes a considerable amount of time to replace the production line to make a different model, and labor-management discussions must be made to transfer work to another factory. Workers in charge of producing popular car models are unfavorable to handing over their work to other factories because they can receive additional wages through overtime and overtime.

Because of this, production of popular models is delayed and consumers wait for several months, but factories that produce models with sluggish sales sometimes shut down. This leads to double losses. This is because inefficiency occurs in the production process, and at the same time, consumers who have been waiting for shipment while the production increase is delayed, abandon the contract and purchase another car, leading to consumption churn.

Hyundai Motor’s production rigidity contrasts sharply with foreign companies that are reinforcing multi-product, small-scale production systems. Mercedes-Benz invested 730 million euros (about 1 trillion won) to build a smart factory’Factory 56′ in Sindelfingen, Germany, which maximizes production flexibility, and started operation in September. The plant produces everything from internal combustion engine vehicles to electric cars, small cars to luxury large cars on one production line. Through simple construction over the weekend (2-3 days), any vehicle type can be mixed in one production line.

Some changes are happening in Hyundai Motor Company. According to the industry, Hyundai Motor Company is developing a flexible production system that allows one production line to produce different models according to demand. This system will be piloted at the Ulsan plant that produces electric vehicles. An industry insider said, “The union, which knows that changes are necessary to survive, is also actively engaged in discussions on accepting the conversion arrangements,” and said, “There will be a big change in the production method of Hyundai Motors soon.”