Honda Expands 200,000 Units; Kia Defers 300,000 Units
This is what we do. AutoPacific and VehicleVoice contuously monitor the American and worldwide auto industry for issues that impact VehicleVoice panel members. The simple fact that Asian manufacturers are adding capacity or delaying capacity additions in North America are major issues.
Kia Puts 300,000 Unit Plant in Georgia on Hold
In early March 2006, Kia announced that they were going to build an all-new greenfield assembly plant in Western Georgia. This 300,000 unit, $1.2 billion plant likely would have provided Kia with the NAFTA capacity to build an all new pickup truck. This plant, along with Toyota adding capacity at the newly available Subaru indiana Automotive plant (to build the Toyota Camry) put more pressure on the Big Three.
Pressure is temporarily off given Kia’s April 27 decision to indefinitely defer building the plant in Georgia and an additional plant in Eastern Europe in Slovakia. This is a total of $2.4 billion in new plant construction put on hold. The suspension was due to the management crisis Hyundai-Kia is facing in Korea with its Chairman Chung Mong Koo having been put in the slammer (Seoul Decention Center) on charges of embezzlement and breach of trust. Chairman Chung has been closely involved in all decisions concerning Hyundai and Kia plans – worldwide and in the USA.
Honda Decision for a New Plant Replaces Kia Threat
While Kia backed off in late April, Honda announced on May 17 it is building a new 200,000 unit assembly plant in North America. Honda, a master at flexible assembly and super-efficient plants, will have capacity for about 1.6 million units in North America when the new plant is on line in 2008. At present, the site for the new plant has not been announced.
Kia Likely Will Be Back Soon
We also have to believe that the deferral of the Kia assembly plant is only temporary. Kia’s pickup truck concept has been favorably received at auto shows and clearly could have a place in the USA market – but Kia needs a NAFTA source to avoid the 25% “chicken tax” on imported pickup trucks. Once the smoke clears from the scandal surrounding Chairman Chung the go code will likely be given again.
Pressure on Big Three Continues Unabated
It does not matter if the pressure is coming from Japan-based competitors or Korea-based competitors, the challenges to the American auto makes continues to increase. Saddled with older facilities, aging workforces, UAW contracts and work rules, the American manufacturers continue to be battered by the new, non-union plants from Asian manufacturers on their home soil. There are also vibrations from Europe that possibly a Peugeot, Audi or Volkswagen plant could be in the offing.