The largest automotive manufacturing complex in the world boasts five high-tech plants, but sales slumps and strikes have affected output at Hyundai Ulsan. AMS paid a visit to Fifth Plant to see Genesis productionThere is no place in the automotive world like Hyundai Ulsan. With five vehicle plants spread over 5m sq.m, the OEM’s manufacturing complex on the south-eastern coast of South Korea is the largest in the industry, capable of turning out more than 1.4m units per year – a staggering 6,000 per day, or one every ten seconds. Although Hyundai has expanded overseas in recent years and now operates 20 plants in eight countries, the Ulsan site is still responsible for about one-third of the OEM’s global production. Around 4,000 vehicles per day are shipped out through the port which lies conveniently close to the manufacturing facilities, totalling 920,000 units last year.
However, capacity is one thing; being able to use it is another. While Ulsan made 1,513,000 vehicles in 2013, more recently production has been hit by difficulties at home and threatened by other issues abroad. In June, domestic sales decreased by 11.6% year-on-year to 61,837 after the end of tax incentives for car buyers, although such a nationwide change is not likely to affect Hyundai’s longstanding dominance in its home market, which sees it taking almost half of all sales alone and over 70% with partner Kia, leaving rivals trailing.
A more serious domestic problem, shared among Korean vehicle-makers, is the frequency of strikes at manufacturing facilities. These happen on an almost annual basis, encouraged by strong unions and wider labour challenges in the country. Since Hyundai employs a veritable army of workers at Ulsan – no fewer than 34,000 – there is potential for a lot of damage to be done. Indeed, particularly troublesome stoppages last year cost the OEM over 100,000 units of lost production and did nothing to help it reverse a slide in profits, which amounted to 5,720 billion won ($4.9 billion) in 2016 compared with 6,509 billion in 2015. Further worker protests took place this summer.
Combine these domestic difficulties with troubles abroad, including a drop in demand in China and threats by President Donald Trump to end free trade between the US and South Korea, and a global capacity of 4,850,000 units a year starts to look unnecessary at best.
Double or triple checking quality is a feature of Genesis production, according to plant director Hyunwoo Cho
A fresh start for Genesis vehiclesThe newest facility in Ulsan’s quintet, opened in 2007, mostly builds the Genesis vehicles with which the Hyundai Group aims to take a share of the luxury market not only at home but in the US, China and the Middle East. Genesis was subsumed within Hyundai for many years but spun off as a separate brand in 2015 and its range now includes the G90, G80 and G80 Sport, while the latest model, the G70, was in pilot production when AMS visited in early June. The plant has an annual capacity of 130,000 vehicles and in addition to Genesis models it makes the Hyundai Tucson SUV, including a fuel-cell version in a separate facility. Last year, 87,172 Genesis vehicles were shipped worldwide from Fifth Plant.
In general, the five Ulsan plants are equipped with similar technology, for example machines that are designed to handle multiple different models. However, Fifth Plant pioneered roof laser brazing in late 2015 for the G90 to improve exterior quality, as well as ultimately boosting cost-effectiveness by simplifying the roof mounting process. Laser brazing is not applied to the G80 model, which passes through the station untouched, but it will be performed on the G70 in series production; at the time of AMS’ visit, only pilot cars had been treated in this way. The process is conducted in 30 seconds and within a tolerance of 0.3mm; the roofs are then examined for flaws, but these are found in fewer than 3%, ie only a handful of units. Three checks take place per vehicle, two robotic and one by personnel; double or triple checking to ensure quality is something that Fifth Plant director Hyunwoo Cho (see interview below) regards as a feature of Genesis production.
Elsewhere, an electrical measuring system not commonly seen in bodyshops is used to ensure high-quality closures. A worker hooks a hinge onto one of three ‘pillars’ standing next to the line, then the entire system slides towards the vehicle body so that the employee can tighten the bolts. ‘Perfection before production’ reads a banner in the bodyshop, and indeed this system is one of several used in Genesis manufacture which embody this philosophy.
The luxury of lower cycle timesThe bodyshop is almost 100% automated, with 157 Yaskawa robots and only 100 people and, like most other facilities at Ulsan, it operates two shifts per day. However, throughput is slower at only 24-28 cars per hour, partly due to the premium nature of the vehicles produced. It takes eight hours to weld a Genesis body, compared with two hours for the Elantra in Third Plant; this is followed by 11 hours in the paintshop and nine hours in assembly (versus seven and five hours respectively).
By contrast, the assembly hall is only around 10% automated and requires 500 workers per shift, 1,000 per day. On the Genesis line (the other builds the Tucson) the cycle time is about 130 seconds due to the high number of parts and the care taken to install them, making it only half as fast as the quickest facility at Ulsan, Third Plant. Consequently, the 1.3km conveyor moves slowly and it takes more than a full shift to bring a Genesis vehicle from start to finish.
Engines, transmissions and seats for Genesis cars are all made at Ulsan, though other components come from affiliates and suppliers within South Korea; racks and trolleys are used for lineside kitting to make installation more efficient. One notable aspect of the assembly procedure is the fitment of the front and rear axles as a single unit to save time. This module sits on its own platform ready for integration by four personnel into the car body, now raised overhead. A little further down the line are three more platforms on tracks, their movement controlled by the workers, who are busy installing parts, adjusting torque and fitting fuel sensors and the tyre pressure monitoring system. When the vehicle is complete, it heads off to be inspected and tested – more than once, of course.
In need of regenerationThe Hyundai Group’s bestseller within its latest brand is the G80, of which 3,425 were sold in South Korea in June while 2,607 were exported, bringing the H1 total to 20,973 domestically and 11,453 abroad, with exports picking up pace over the first six months of the year. However, the OEM clearly cannot rely on premium models to bolster overall numbers. Alongside the drop in Hyundai’s domestic sales of 11.6% in June, overseas sales were down 16.2% compared with the previous year, at 314,272, which the company said was due to reduced demand in China. In April, Reuters claimed that both Hyundai and Kia had cut production at their Chinese factories after sales slumped amid a political dispute. Since July, capacity has surely slipped further out of line with demand after the opening of Hyundai’s fifth plant in China, which has added 300,000 units to a total of 1.65m in the country.
Meanwhile, if Donald Trump carries out his threat to end free trade between the US and South Korea, among many international agreements in his sights (but not yet terminated, it should be noted), then Hyundai would be one of the biggest losers. Although the OEM has had a plant in Alabama since 2005, the US is still one of its largest export markets, taking 38,400 Hyundai vehicles in June and 187,281 in the first six months of the year (including 1,281 G80s for the month and 7,767 up to June). “Amid slowing global economic growth, uncertainties are rising more than ever as protectionism spreads and competition intensifies in the auto industry,” chairman Mong-Koo Chung told employees in January.
Chung’s remark came after the second consecutive year in which Hyundai and Kia missed their global sales goal, selling 7.88m against a target of 8.13m worldwide (4.86m against 5.01m for Hyundai). It was the first annual sales fall since 1998 and also the fourth year of decline in profitability. With sales and production difficulties at home and political complications abroad, now is clearly not the most positive period for the Group, though it is far from the only OEM struggling to maintain growth in turbulent times. But the owner of the largest automotive manufacturing complex in the world has not stopped dreaming big; it has set a sales target of 8.25m this year – higher even than in 2016.