Hyundai finds solution for pigment shortage

NEW YORK Wed Apr 20, 2011 8:45pm EDT

NEW YORK (Reuters) - Hyundai Motor (005380.KS) can within five weeks overcome the shortage of a key shiny pigment for vehicle colors by shifting suppliers and changing ingredients for its paint, said John Krafcik, Hyundai's North America chief executive.

Krafcik said the Korean automaker will phase in a formula that uses the mineral mica instead of a pigment called Xirallic, which is used by most automakers but only made at a single factory in Japan that shut after the March 11 earthquake and the following nuclear crisis.

"It's a more readily available component, not single-sourced as Xirallic," Krafcik said of mica, a silicate mineral commonly used in paint pigments.

He would not say which suppliers Hyundai is using or how the new method will affect the automaker's costs.

Hyundai's assembly plant in Alabama and its supplier plants will begin spraying paint with the new mica make-up within two weeks and finish the switch to it within five weeks, he said.

The new formula will give paints a similar glitter and shine as Xirallic, said Krafcik in an interview with Reuters on the sidelines of the New York auto show.

Virtually every automaker -- including Toyota Motor Co (7203.T), General Motors Co (GM.N), Ford Motor Co (F.N) and Chrysler Group -- are grappling with the shortage of Xirallic, which has prompted many of them to temporarily restrict orders for vehicles in certain shades.

Xirallic was made only at the Onahama plant in Japan, near damaged Fukushima Daiichi nuclear power plant. The factory is operated by German chemical company Merck KGaA (MRCG.DE).

Krafcik said the roll-out of the new paint is tied to the on-hand supply of Xirallic.

Hyundai plans to create new color selections for its cars as vehicles painted with the new formula become available. Where possible, the switch-over will occur when new year models are introduced, said Krafcik.

Switching to a new paint formula comes with what Krafcik called a "tremendous logistical challenge," namely being stocked up and prepared for possible repairs of cars painted with both Xirallic and mica pigments in the future.

"We actually have to go and rename, recode and respecify every paint," Krafcik said.

"In some cases, (Xirallic and mica) are so close that we may run it forever. We were able to get very, very close.".

Krafcik said the automaker has been under pressure to act fast in finding a solution to the paint shortage.

"If you don't do it quickly, then you're telling customers they can't have the color that they want," Krafcik said.

"You're really significantly reducing choice. It is kind of a big deal."

(Editing by Steve Orlofsky)