Hyundai’s Power Play
Hyundai’s $135 million Alabama investment puts it among a handful of U.S. manufacturers of heavy power transformers.
Workers wind insulated copper to encircle the core of the transformer.
This is the Hyundai plant in Alabama that doesn’t make cars.
It’s Hyundai Power Transformers USA and, as the name suggests, it makes transformers for the power industry. A division of Korea-based Hyundai Heavy Industries, Hyundai Power Transformers (HPT) has been largely out-of-sight and out-of-mind since it began production in Montgomery in 2011. But that’s quickly changing.
HPT has grown to 330 employees in six years and expects 2017 sales of $130 million. It plans to double its current level of business in 2019, and there is every reason to think that will happen.
According to the company’s website, power transformers have a lifespan of 20 to 30 years, and 60 percent of transformers in service are more than 20 years old. That bodes well for companies like HPT, since many of those transformers already need or will need to be replaced in the coming years.
The Department of Energy has no accurate count of large power transformers but estimates that the number could be in the tens of thousands. Most transformers in service were made overseas, but there is growing demand in North America for transformers made in America. That’s because manufacturing them is a long, complicated process, and utilities find it easier to deal with domestic manufacturers to address both pre- and post-purchase questions more quickly.
Hyundai Power Transformers is among a small group of relatively new facilities that make transformers in the U.S. Five years ago, in its first year of production, HPT sold 11 transformers. This year it expects to sell 81 units to customers that include Florida Power and Light, Duke Energy, Bechtel, Calpine, Oklahoma Gas and Electric, First Solar, Cleco and Next Era Energy. Southern Company and Exelon are also on the customer list.
The company expects unit sales to double to 160 transformers in 2019 and 250 by 2021. Each transformer typically sells for between $1.5 million and $2 million, HPT says.
Power transformers regulate the flow of electricity, much the way a water valve increases or decreases the flow of water. A transformer does not generate electricity; rather, it accepts incoming electricity and either increases or decreases the voltage before sending it to the next stop in a power system.
Says Tony Wojciechowski, director of human resources at HPT, “Whatever energy source you have, whether you’re making energy by burning coal, nuclear energy, water running over a dam, wind energy, whatever, you have to regulate it. You have to step it up or step it down. If you do too much, you blow out the lines. Do too little, and you have rolling brown outs. Our transformers are regulating the power as it’s used by the consumers.”
ABOVE Workers assemble every element of a transformer, then test it, then disassemble it for shipment to a customer site, where they reassemble it.
Hyundai Power Transformer units made in Alabama range from 60 tons to 280 tons and stand as much as 30 feet tall. They take 10 to 12 months to build, because of their complex design, precise materials and construction requirements.
Primary components include a core consisting of hundreds of razor-sharp sheets of silicon steel that are precision-cut to length, shape, slot and hole locations. Ironically, perhaps, these steel sheets must be hand-stacked during the assembly process to ensure quality control. HPT cuts several tons of silicon steel daily.
Transformers also include what amounts to large cylinders called “windings,” with insulated copper wiring, that are placed around the core. Various insulation materials, such as high-density press board and electrical insulation paper, keep out moisture and protect against short-circuiting. Interior oil keeps the transformer from overheating, and a tank protects its active parts.
A typical 100-ton transformer will contain about 50 tons of steel (40 tons in the core, 10 in the tank), 20 tons of copper and thousands of gallons of oil. All of HPT’s transformers are oil-immersed and are considered by many to be safer than those cooled by air.
In hindsight, the success of Hyundai Power Transformers seems to be a stereotypical case study in planning and executing. At a time when the company had no work force and no production facility, HPT drew up a five-year plan that began with construction of the plant in Montgomery County a few miles from the Hyundai Motor Manufacturing Alabama facility.
Building the plant was one thing, but finding a work force on a veritable drop of the dime was another. At the time of startup, there were no power transformer laborers in Alabama. For managers, the company recruited some professionals from competitors elsewhere in the U.S. But it relied heavily on AIDT, the state’s industrial training unit, to develop its floor production workforce.
“AIDT was very instrumental in helping us develop the work force from a pre-employment standpoint and even from a post-employment standpoint,” says Wojciechowski. “We had people go through four weeks of pre-employment training prior to becoming team members. They studied the transformer manufacturing process, math, blueprint reading, precision measurement and problem solving. There was a curriculum that everybody went through for almost the first two years when we were building this team.
“Several in the first group went to Korea and trained 9 to 10 months, and as they returned and we started the plant, AIDT continued to support us for the next year. That was about 90 people and we’ve got 330 now. So we still had a lot of people to employ, but the training became on-the-job. But AIDT helped us develop those essential skills.”
HPT also has worked with the Alabama Technology Network, the Montgomery Chamber of Commerce and others in continuous improvement programs, which has included a near-perfect safety record for lost-time injuries, according to Wojciechowski.
Jung Sung Lee, president and CEO of Hyundai Power Transformers, says the complexity of transformer manufacturing is a constant challenge. “Our company’s transformers are very much in demand in North America, but they are very technical to produce,” Lee says. “We spend more than $1 million annually in technical training for our team members, and some areas of production require up to five years of on-the-job training. We provide this training continuously, but it is very costly in our process.”
The current plant cost $135 million and consists of 282,000 square feet on 36 acres. The company has an additional 64 acres to develop for an expansion that is now in the planning stages. That expansion will make the company’s manufacturing capacity 60 percent larger, according to Lee.
The future does indeed look strong for the company, which lost more than $98 million before reaching its breakeven point in 2016. But the company knew it would lose money its first few years, and it started making money according to its five-year plan’s timetable.
“December 22, 2016 was the date of our breakeven award banquet,” according to Tae Soo Kwon, chief financial officer for Hyundai Power Transformers. “That was a momentous occasion for us. That was our coup de grace to the days of losing money. That’s when we basically said ‘Thank You’ to everyone for achieving our breakeven point.”
Charlie Ingram and Cary Norton are freelance contributors to Business Alabama. Both are based in Birmingham.