Hyundai suspending South Korea production as parts supply hit

Seoul

HYUNDAI Motor said it will suspend production in South Korea, its biggest manufacturing base, becoming the first major carmaker to do so outside China due to disruption in the supply of parts resulting from the corona-virus outbreak.

Many global carmakers, including Tesla, Ford , France's PSA Peugeot Citroen and Japan's Nissan and Honda Motor, have already suspended some plants in China this week in line with government guidelines.

The flu-like virus has killed over 420 people and spread to about two dozen countries, sparking fears for global economic growth and rattling markets, with Shanghai's stock index losing some US$400 billion in market value on Monday.

Hyundai's decision to power down assembly lines at home could delay its recovery from a sales slump.

The carmaker recently turned in its best quarterly profit in over two years and said it was on track for higher profit margins, aided by more sales of sport utility vehicles such as the Palisade and Kona.

Hyundai already stopped production of the popular Palisade over the weekend due to a shortage of components from China.

Most of Hyundai's South Korean factories will be fully idled from Feb 7, while some production lines are expected to restart on Feb 11 or Feb 12, a union official said, declining to be identified given the sensitivity of the matter.

Schedules for suspension will vary by production line, a Hyundai spokeswoman said.

The idling, which had been discussed by Hyundai management since Monday, was due to a shortage of vehicle parts called wiring harnesses, car industry officials said.

Hyundai and its affiliate Kia Motors, together the world's No 5 carmaker, do not keep large stocks of the part, which is mostly made in China, said Lee Hang Koo, senior researcher at Korea Institute for Industrial Economics & Trade.

"Hyundai and Kia may be more affected as they tend to import more parts from China than other global automakers," Mr Lee said.

Hyundai's reliance on China has grown sharply as it built a huge production capacity in the country several years ago when its business was booming there, he added.

"South Korean parts makers followed and built their own facilities along with Hyundai," Mr Lee said.

Hyundai has seven factories in South Korea, catering to the local market and the United States, Europe, Middle East and other countries. Hyundai's production at home accounts for about 40 per cent of its global output.

South Korea imported US$1.56 billion worth of car parts from China in 2019, versus US$1.47 billion in 2018, trade data shows.

Japanese trading house Mitsui & Co has also warned that the virus outbreak may slow manufacturing activities in automobiles and other sectors.

As manufacturers struggle to get factory workers back to production line due to extended holidays and suspension of public transport systems in some cities, China's trade agency said it would offer force majeure certificates to companies struggling to cope with the impact of the virus. REUTERS

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