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Carmakers set to restart production this week amid eased parts supply crunch

All News 11:17 February 10, 2020

By Choi Kyong-ae

SEOUL, Feb. 10 (Yonhap) -- Carmakers in South Korea on Monday said they are set to resume their vehicle production this week temporarily suspended due to parts shortages caused by the new coronavirus outbreak, easing concerns an extended output loss will cut into their first-quarter earnings.

Hyundai Motor Co. and its affiliate Kia Motors Corp. expect to partially resume production at their domestic plants Tuesday as auto components are expected to arrive from Southeast Asian countries amid a lack of parts supply from China hit by the spreading coronavirus outbreak.

"(Hyundai and Kia) are planning to resume operations of our plants upon arrival of auto components from Southeast Asian countries, but full-scale resumption will be unlikely," a Hyundai Motor Group spokesman said over the phone.

This photo taken Feb. 7, 2020, shows Hyundai Motor's main Ulsan plant after the company suspended all of its domestic car assembly plants due to a lack of parts from China amid the spreading coronavirus. (Yonhap)

The carmakers fully brought their local plants to a halt Friday and will keep them suspended through Monday as their China-based South Korean suppliers have suspended their production since Jan. 24 when China's Lunar New Year holiday began.

Hyundai and Kia plan to receive auto parts from companies in Southeast Asia for the time being unless parts supplies from China are normalized as expected next Monday, the spokesman said.

The Chinese authorities had called on manufacturers to stop operations until Feb. 9, a week after the end of the holiday, to keep the deadly respiratory illness from spreading further.

Hyundai has seven domestic plants and 10 overseas plants whose combined capacity reaches 5.5 million vehicles. Kia has eight local plants and seven overseas ones whose capacity stands at 3.84 million units.

It is the first time Hyundai Motor has temporarily halted all of its domestic production lines since 1997, when the Asian financial crisis affected local manufacturers and Mando Corp. stopped supplying parts to the carmaker.

Three other carmakers -- SsangYong Motor Co., Renault Samsung Motors Corp. and GM Korea Co. -- also expected parts problems will be resolved sooner or later.

SsangYong Motor and Renault Samsung said their plants will resume operations Thursday and next Monday, respectively, as their Chinese suppliers began production this week.

SsangYong Motor stopped the operation of its sole plant in Pyeongtaek, 70 kilometers south of Seoul, last Tuesday and will maintain the suspension until Wednesday. Renault Samsung plans to halt production at its sole plant in Busan, 453 km south of Seoul, from Tuesday to Friday.

GM Korea said its production has not been affected by the coronavirus outbreak though it is closely monitoring the situation involving the virus to avoid any impact on its production.

If the suspension period ends within a week, industry people and analysts expect no major impact on the carmakers' business results for the January-March period as they will be able to fill the output gap through overtime work.

Once its plants resume production, Kong Young-woon, president of Hyundai Motor's strategy planning division, said last week the company will initially focus on the production of popular models, such as the flagship Palisade SUV and the GV80 SUV, sold under Hyundai's independent Genesis brand to meet rising demand.

This photo taken Feb. 6, 2020, shows Hyundai Motor's main Ulsan plants' port ahead of their suspension. (Yonhap)

South Korean officials and Hyundai Motor Group have asked the Chinese authorities to help Chinese manufacturers resume operations this week to avoid an impact of supply chain disruptions on their corporate customers.

Hyundai Motor Group asked Chinese officials to extend help in making quarantine systems ready in the plants of its South Korean suppliers in China.

The trade ministry said Friday it will take all necessary efforts to minimize the economic fallout of the supply disruptions on local carmakers.

To tackle supply shortages, the ministry said it will seek to simplify the import processing for auto parts from Vietnam, Cambodia and the Philippines; provide financial subsidies to local auto part makers, including loans for the expansion of production lines; and fund their research and development projects.

South Korea had reported 27 confirmed cases of the deadly virus as of Monday.

As of 10:50 a.m., Hyundai Motor fell 1.2 percent to 129,500 won, Kia Motors declined 0.3 percent to 40,350 won, and SsangYong Motor shed 0.3 percent to 1,885 won. The broader KOSPI fell 0.9 percent.


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