Hyundai May Subcontract Some Vehicle Production

Hyundai Motor Co. may invest in a vehicle assembly plant in Gwangju, South Korea, that would be operated by a contractor.

Hyundai says it already has committed to investing in new capacity. But the company acknowledges it is pondering whether to become a non-controlling investor in the facility, which would then be owned and operated by others, JoongAng Ilbo reports.

Other carmakers have used contract assemblers, such as Magna Steyr in Graz, Austria, to build low-volume models or handle relatively short-term capacity demands. But Reuters says the Hyundai scheme would mark the first time a vehicle company made contract production an integral part of its own manufacturing strategy.

The Gwangju government proposes to build the factory in 2020 or later, according to JoongAng. The Seoul-based newspaper says the facility would have annual capacity to assemble 100,000 vehicles and cost at least 500 billion won ($468 million).

The report says the government has pledged to hold average annual hourly wages at 40 million won ($37,400), or about half the rate Hyundai pays for its own workers. Hyundai’s union has urged the company to drop the idea, branding it a political decision that will erode wages for existing workers.