Despite a reported last-minute incentive offer of $US123 million from the state government of Kentucky, Hyundai Motor Company, Korea's largest automotive manufacturer, yesterday announced it would build a $1 billion car plant in Montgomery, Alabama.

Hyundai said the factory - its first assembly plant in the US - will start production in 2005, creating approximately 2,000 plant jobs in Montgomery and the surrounding area.

The plant, to be built on 1,600 acres, is expected to produce the Sonata saloon and Sante Fe SUV at the rate of 300,000 vehicles per year at full capacity.

In a statement, Hyundai said the decision to build the factory was based on continued strong sales and market share growth in the US market.

In 2001, Hyundai's Automotive Group (which includes both Hyundai Motor America and Kia Motor America in the United States) sold 569,956 cars, an increase of 29 percent over 2000, and the largest year-on-year increase in the US car market last year.

"Our decision to build this facility underscores our commitment to the US market," said Hyundai Automotive Group chairman Mong Koo Chung.

Apparently acknowledging Hyundai's shaky reputation for quality in its early days in the US market, Chung added: "American consumers have increasingly placed their trust in Hyundai automobiles, as witnessed by our track record of strong sales growth over the last several years."

Chung said that Hyundai was in the process of doing more design and engineering in the United States so that its products would be better adapted to the American consumer's needs and tastes.

"Our new plant will allow us to build more vehicles for this growing market and get them to our customers more quickly," he said.

HMC said that it chose Montgomery because of its high-quality workforce, its strategic location in proximity to major population centres, the "superb" automotive parts supply chain available in the region and the commitment shown by both the state of Alabama and the city of Montgomery.

Alabama officials have been steadily wooing international car makers to their state in recent years. In the late 1990s, DaimlerChrysler, with which Hyundai is now affiliated, built its Mercedes-Benz M-Class SUV plant in Vance, between Birmingham and Tuscaloosa. Honda followed with a plant near Talladega to boost supplies of the Odyssey minivan it also assembles in Canada. Next year, Toyota is due to start building V8 engines at a new plant near Huntsville.

An official groundbreaking for the Hyundai plant on April 16 will be attended by group chairman Chung and other key executives.

According to the Associated Press (AP), Alabama state governor Don Siegelman received a telephone call from Hyundai's president just before 10 p.m. on Sunday night telling him the plant would be built in Alabama. City and state officials has been courting the Korean car maker for months.

Kentucky governor Paul Patton told AP that Hyundai had also phoned him about its decision.

AP said that Kentucky and Alabama were the two finalists for the plant and that the Alabama state legislature last month approved a $118 million incentive package to encourage Hyundai to build the assembly plant near Montgomery.

On the same evening that the Alabama governor received the good news from Hyundai, the Kentucky House of Representatives passed an incentives package worth $123 million, AP added. The enticements included money for land acquisition, site development, worker training and a direct payment to Hyundai.

Greg Stumbo, Kentucky's House majority leader, told AP that its package was slightly more generous than Alabama's. "Negotiations have been very, very intense and very tough," he said.

AP said that Kentucky's motor vehicle manufacturing industry already includes the operations of key players such as General Motors whose Bowling Green plant makes Corvettes, two Ford Explorer, pickup and heavy truck plants in Louisville and Toyota's Camry, Avalon and Sienna minivan plant outside Georgetown in central Kentucky.

Before selecting the Alabama site over the competing Kentucky deal, Hyundai had earlier ruled out bids from the states of Ohio and Mississippi.

AP said the new Alabama plant would be Hyundai's second in North America as the company had originally built a Canadian plant in Bromong, Quebec, in 1989, the first overseas assembly plant operated by a South Korean car maker.

But, AP added, Hyundai closed the plant in the 1990s because of a dwindling demand for the mid-size Sonata in North America.