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S. Korean carmakers face shutdown of overseas plants amid virus fears

All News 11:29 March 19, 2020

SEOUL, March 19 (Yonhap) -- South Korean carmakers are likely to shut down their overseas plants as their global peers are planning to close factories as a precaution against the rapid spread of coronavirus.

Local carmakers already suffered production losses due to a lack of parts when their suppliers in China suspended plants due to an extended Lunar New Year holiday amid fears of COVID-19 infections.

The worsening outbreak is now dealing a further blow to the automobile industry as Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles have agreed to close all U.S. plants and European carmakers such as BMW and Mercedes-Benz have begun to shut down plants in Europe.

This photo taken on March 18, 2020, shows completed vehicles lined up at Hyundai Motor's port in Ulsan, 410 kilometers southeast of Seoul. (Yonhap)

A prolonged coronavirus outbreak would drive down vehicle sales and carmakers are expected to report poor earnings results this year, industry officials said.

In the latest development, Hyundai Motor Co., the country's biggest carmaker, said Thursday it has suspended its plant in Alabama after one of its employees there was infected with the new coronavirus.

"We will decide on when to resume the plant's operations through consultations with the U.S. health authorities," a Hyundai Motor Group spokesperson said.

The United Auto Workers union and the Detroit automakers agreed Tuesday (local time) on coronavirus-mitigation efforts, while other U.S. car factories could be forced to cut production if sales plummet or the virus spreads to their workers.

Hyundai has seven domestic plants -- five in Ulsan, one in Asan and one in Jeonju -- and 10 overseas plants -- four in China and one each in the United States, the Czech Republic, Turkey, Russia, India and Brazil. Their combined capacity reaches 5.5 million vehicles.

As European countries close their borders and restrict movement in an effort to slow the spread of COVID-19, the automobile business will bear the brunt of the virus' economic impact, Kim Tae-nyen, vice president of the Korea Automobile Manufacturers Association (KAMA), said over the phone.

"Global vehicle demand is likely to plunge as it did during the 2008 financial crisis if the virus outbreak continues for more than three months without being contained. A sharp decline in exports would cut into the carmakers' bottom line this year," Kim said.

Jose Munoz, chief executive of Hyundai Motor's North American division, said in an interview with Automotive News that he expects Hyundai's U.S. sales to fall by 10 to 20 percent this year if the virus outbreak continues.

The spreading virus is expected to affect overseas plants of Hyundai's 34-percent owned affiliate, Kia Motors Corp., sooner or later, the KAMA official said.

Kia has eight domestic plants -- two in Gwangmyeong, three in Hwaseong and three in Gwangju -- and seven overseas ones -- three in China and one each in the U.S., Slovakia, Mexico and India. Their overall capacity is 3.84 million units.

Hyundai and Kia, which together form the world's fifth-biggest carmaker by sales, were targeting a bigger share in the U.S. by launching new models this year.

The new models include the GV80 SUV and G80 sedan to be launched under Hyundai's independent Genesis brand in the first half of 2020 and Hyundai's Tucson SUV and Kia's Sportage SUV and Carnival van to be released in the second half.

Hyundai and Kia sold 1,304,109 vehicles in the world's most important automobile market in 2019, up 4.6 percent from 1,257,307 a year earlier. They sold 7.19 million autos globally last year and aim to sell 7.54 million units this year.

Shares in Hyundai Motor were 4 percent lower at 70,600 won and Kia's were 4.9 percent down at 24,050 won, underperforming the broader KOSPI's 3.4 percent loss, at 10:30 a.m.

Three other local carmakers -- GM Korea Co., Renault Samsung Motors Corp. and SsangYong Motor Co. -- also face an uphill battle due to declining demand in global markets.

As their domestic sales and exports continued to fall in January and February, the virus crisis will deal a bigger blow to the South Korean units of GM, Renault S.A. and Mahindra & Mahindra Ltd.


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