Alabama's Big 3 hang tough Carmakers confident

Alabama's Big 3 hang tough, optimistic that expansions, revampings will cushion bumpy ride

By KAIJA WILKINSON

Business Reporter

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Alabama's big three automakers - Mercedes-Benz, Honda and Hyundai - suffered some slumps in 2007, but look to combat a soft economy with expansions and revamped automobiles, company officials and experts say.

James Cashman, a professor of management at the University of Alabama, said the foreign automakers in Alabama will be better positioned to weather storms than Detroit's Big Three - GM, Ford and Chrysler - which have seen their sales consistently head down over the past decade or so.

"But no matter who you are, you're going to have to hold on tight for maybe the next several years," Cashman said.

In the early 1990s, Cashman said, U.S. economists predicted that annual sales of new cars in the U.S. would top out at 15.5 million. In the past few years, however, sales have consistently been 16 million to 17 million.

This year, however, some industry watchers believe that sales will again dip back into the 15 million range, he said.

In some cases, Alabama numbers point to that trend.

Hyundai misses goal

Year-end numbers show that orders from Hyundai's Alabama plant fell about 50,000 short of a 300,000-vehicle goal. Sales of the sport utility vehicle Santa Fe enjoyed a 44.6 percent increase over 2006 with 92,421 sold, while sales of the Sonata sedan dropped 2.6 percent to 145,568 sold, according to the company.

But the automaker is confident about this year, with South Korean parent Hyundai Motor Co. expecting a 10 percent sales increase in the U.S. this year thanks in large part to new models.

Hyundai spokesman Jake Jang said the company expects to sell 515,000 vehicles in the U.S. this year, up from 467,009 cars sold in the States in 2007.

A 2009 Sonata boasting a new dashboard, grill, and front and rear lighting is set to start production later this month, however, and the company is optimistic it will inject new life into sales.

It is scheduled to be unveiled at the Chicago Auto Show in February.

Also on tap for Hyundai: A new import, the Genesis Coupe, is expected to arrive this summer from Korea for distribution in the U.S.

Like its competitors, Hyundai has expanded since May 2005, when it began operations at its $1.1 billion, 2-million-square foot facility. The company is building a new, $274 million engine plant that could add 500 employees to its current payroll of 3,300, said Robert Burns, spokesman for Hyundai Motor Manufacturing Alabama LLC in Montgomery.

That plant is expected to start brief production this summer or fall, he said.

Jason Hatter, a field engineer with the nonprofit Alabama Productivity Center at the University of Alabama, said he believes Hyundai has the formula to persevere.

"They've got quite a few vehicles on the yard which is never a great sign, but if you look at the Korean quality record and price point, you really can't beat it," Hatter said.

"They're in the hunt, definitely," he added.

Mercedes has strong '07

Also in the hunt is Mercedes-Benz U.S. International, Alabama's first auto manufacturer, which announced last week that its U.S. sales enjoyed a strong 2007, hitting an all-time record of 253,433 vehicles sold.

They included the three vehicles made in the plant at Vance: the M-Class SUV, the R-Class sports wagon, and the GL luxury SUV.

While sales of the R-Class slumped more than 28 percent since 2006, sales of the luxury SUV surged more than 40 percent, and to a lesser extent for the M-Class, which saw a 7 percent sales increase.

Cashman said Mercedes-Benz - despite its cars being pricier and less fuel efficient than its Alabama competitors - has successfully recaptured a reputation for quality. For a while in the 1990s, he said, the company "really, really stumbled, particularly on electronics."

According to the Economic Development Partnership of Alabama, Mercedes-Benz now has about 4,500 employees and had invested about $1 billion, including a $600 million expansion, in its plant.

Odyssey, Pilot down

American Honda Motor Co., meanwhile, reported its best sales year ever in 2007, but autos made at the company's Lincoln plant weren't the main drivers. Sales of the Odyssey minivan were down more than 3 percent, and sales of the Pilot SUV were down more than 23 percent, according to the company.

Dick Colliver, executive vice president of American Honda, said 2008 won't be easy, but that he believes Honda has an edge in being "the most fuel-efficient car company in America," and that new products - like a drastically modified Pilot - bode well for the company.

Cashman agreed. "(Honda) continues to retain a strong brand name," he said. "It's widely recognized as moving into some of the interesting technologies by getting away from fossil fuels and into hybrids, which enhances the brand. "

The facility started production in fall 2001, and has the capacity to produce 300,000 vehicles and V-6 engines annually, according to the company.

It has 4,500 employees, and recently underwent a $40 million expansion of its engine manufacturing facility, said spokesman Ted Pratt in Lincoln.

Other prospects

Alabama's burgeoning industry promises to grow even more with rumblings of interest from Volkswagen and Isuzu and a new, 2,800-employee Kia plant taking shape in West Point, Ga., only 28 miles from Auburn.

Last Friday, Kia said it would make a "major announcement" this Tuesday about that plant, which held a groundbreaking in October after having been delayed since April.

Kia said last Wednesday that its 2008 global sales would rise about 24 percent, to 1.7 million vehicles.

(The Associated Press contributed to this report.)