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  • The Hyundai Effect

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    Automaker, suppliers have $4.8 billion annual economic impact on state

    October 2015
    By David Zaslawsky
    Photography by Robert Fouts

    Montgomery Mayor Todd Strange can now laugh about a grueling 12-hour marathon negotiating session with Hyundai Motor Co. officials over the automaker’s annual payroll for a manufacturing facility in Montgomery.

    The impasse was finally broken when a Hyundai official wrote: $59,999,999 on a chalkboard. Now, after 10 years of production, Hyundai Motor Manufacturing Alabama’s annual payroll for the Montgomery plant is $216 million and swells to $260 million when including $44 million worth of benefits.

    Hyundai’s economic impact continues to swell even after a report was released just five years ago by Keivan Deravi, an economics professor at Auburn University at Montgomery. He is dean of the College of Public Policy and Justice as well as a leading expert in economic impact modeling.

    “There is no doubt in my mind that HMMA has dramatically changed the manufacturing landscape of the Central Alabama economy and not just here,” Deravi said. “Their impact is far-reaching and extremely impressive.”

    Back in 2011, Deravi determined Hyundai’s annual economic impact, including its suppliers, was $3.8 billion on the State of Alabama in 2010. The Korean automaker and its suppliers had a combined annual economic impact of $1.7 billion on Montgomery County.

    That was so very long ago when you consider that Hyundai added a third shift, hiring nearly 900 employees, and many suppliers also added employees to keep up and some new suppliers came to the area. That brings us to Deravi’s new numbers for 2014 and those numbers “are so significant and so impactful,” he said during a news conference at the Montgomery Area Chamber of Commerce. He could have said staggering and astonishing. Hyundai’s total sales in Alabama were $7 billion in 2014 and the gross domestic product of the Montgomery Metro Statistical Area (that includes Elmore, Autauga and Lowndes counties) was $12 billion. More directly, Hyundai accounts for 20 percent, or $2.4 billion, of Montgomery County’s entire economy.

    “Hyundai has been a game-changer for this community,” said Elton N. Dean Sr., chairman of the Montgomery County Commission. “People need to know the impact that Hyundai has had on this community.”

    Now consider the cost associated with recruiting Hyundai, which was responsible for $81 million in taxes last year. “You don’t need to be a Ph.D. in economics to figure out if the investment in Hyundai was worth it,” Deravi said. “If you invest about $260 million and you’re getting $80 million back (a year) – that’s a pretty darn good investment.”

    Hyundai and its suppliers now have an annual economic impact of about $4.8 billion on the state. That’s because when Hyundai came to Montgomery “we just did not get an operation,” Deravi said. “We just did not get a plant. We got an industry in its entirety. By bringing Hyundai here, we just brought an automobile sector from A to Z, and that’s why the impact is so large, because is it a complete operation.”

    Deravi said that Hyundai and its suppliers have a 38,000 impact on employment and that figure might be the largest impact he has seen from one entity in his career. All the numbers associated with Hyundai and its suppliers – around 40 tier 1 and tier 2 suppliers – are enormous. The overall expenditures, not including interest and depreciation, totaled $6.3 billion in 2014, and $3.1 billion of that was on Alabama-based businesses.

    It was Deravi who conducted the initial annual economic impact in early 2000 when Hyundai was being courted. “We underestimated all the numbers,” he said. One of those numbers was Hyundai’s investment, which has grown 80 percent from the original $1 billion to the now $1.8 billion. The plant has about 3,700 employees, including temporary workers, while the initial economic impact was based on 2,000 employees.

    “Hyundai Motor Manufacturing Alabama could not be more pleased with our contribution to Alabama’s economy and employment,” HMMA President and CEO J.H. Kim said in a statement. “We are proud of our track record as an important and rapidly growing Alabama employer and as a manufacturer of high-value, high-quality and high-efficiency vehicles for American consumers.”

  • Montgomery Area Chamber of Commerce
    600 S. Court St, P.O. Box 79
    Montgomery, Alabama 36101
    Tel: 334.834.5200   Fax: 334.265.4745

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