(LEAD) Hyundai, Kia halt U.S. plants amid virus fears

All News 16:08 March 19, 2020

(ATTN: CHANGES headline and lead; ADDS 2nd photo; RECASTS throughout; UPDATES stock prices in 17th para)

SEOUL, March 19 (Yonhap) -- Hyundai Motor Co. and Kia Motors Corp., South Korea's two biggest carmakers, said Thursday their U.S. plants stopped operations as their American rivals have agreed to close factories as a precaution against the rapid spread of the coronavirus.

Hyundai Motor suspended its plant in Alabama on March 18 (local time) after one of its employees there was infected with the COVID-19 virus, according to Hyundai Motor Group.

On the following day, Kia Motors halted its factory in Georgia due to a lack of engines assembled and delivered from Hyundai's Alabama plant, a group spokesman said over the phone.

"We will decide on when to resume the plants' operations through consultations with the U.S. health authorities," he said.

The United Auto Workers union and Detroit automakers -- Ford Motor Co., General Motors Co. and Fiat Chrysler Automobiles -- 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.

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)

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 the Detroit automakers 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.

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

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.

"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," he 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.

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.

On Thursday, Hyundai Motor plunged 10 percent to 65,900 won and Kia plummeted 11 percent to 22,550 won, underperforming the broader KOSPI's 8.4 percent loss. SsangYong Motor shed 17 percent to 1,130 won.

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.