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(LEAD) Virus-caused supply chain disruptions to affect Hyundai: S&P

All News 19:03 February 06, 2020

(ATTN: ADDS more info in 7th para; UPDATES with minor edits)

SEOUL, Feb. 6 (Yonhap) -- Supply chain disruptions in China caused by the new coronavirus outbreak will likely hurt the first-quarter performance at Hyundai Motor Co. and Kia Motors Corp., S&P Global Ratings Services has said.

In a report released Wednesday, S&P said if the Lunar New Year break in China is not extended beyond Sunday, Hyundai and Kia are expected to normalize Korean production, which accounts for 40-50 percent of total production, in the coming weeks through utilization management.

"However, we expect manufacturing disruptions will increase the burden on the companies' overall production in the first quarter and hurt profitability due to additional cost burdens," the report said.

Another key factor will be whether the disruptions last longer than one or two weeks and affect any major products that have contributed to the carmakers' profit recovery in previous quarters, such as SUVs and premium vehicles, it said.

Hyundai, the country's biggest carmaker, plans to gradually suspend assembly lines at its seven domestic plants by Friday due to shortages of parts produced by South Korean firms in China.

Early this week, Kia, which is 34 percent owned by Hyundai, started reducing output at two of its three domestic plants.

Kia said it will suspend the operation of its three assembly plants in South Korea on Monday for one day. Hyundai is also set to halt operations at its Korean plants the same day.

The Chinese authorities called on manufacturers to stop operations until Sunday, a week after the end of the Lunar New Year holiday, to keep the respiratory illness from spreading further.

South Korea has reported 23 confirmed coronavirus cases as of Thursday.


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