Hyundai to halt South Korea output because of coronavirus

The automaker says the coronavirus is making it difficult for it to get parts from China.

    Hyundai Motor Genesis GV80 SUV is seen during its unveiling ceremony in South Korea; the automotive company has built huge production capacity in China over the past two decades [File: Heo Ran/Reuters]
    Hyundai Motor Genesis GV80 SUV is seen during its unveiling ceremony in South Korea; the automotive company has built huge production capacity in China over the past two decades [File: Heo Ran/Reuters]

    Hyundai Motor Company will suspend production in South Korea because the coronavirus outbreak has disrupted the supply of parts, it said, becoming the first major carmaker to do so outside of China.

    The flu-like virus has killed more than 400 people, and its economic impact has spread beyond mainland China.

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    In China, global automakers have already extended factory closures in line with government guidelines. Those manufacturers include Hyundai, Tesla, Ford, PSA Peugeot Citroen, Nissan and Honda Motor Company.

    "Hyundai and Kia may be more affected as they tend to import more parts from China than other global automakers," said Lee Hang-koo, senior researcher at the Korea Institute for Industrial Economics and Trade.

    European carmakers have suffered disruptions only to their Chinese factories so far, with their European and US plants still running thanks to localised supply chains in keeping with a "build where you sell" strategy.

    Volkswagen, Audi, BMW, Fiat Chrysler, General Motors Co, and Ford said their factories outside of China remain unaffected by supply bottlenecks.

    Hyundai has built huge production capacity in China over the past two decades.

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

    South Korea imported $1.56bn worth of auto parts from China in 2019, up from $1.47bn in 2018, trade data shows.

    Most of Hyundai's South Korean factories will be fully idled from February 7, 2020 with some production lines expected to restart on February 11, 2020, or February 12, 2020, 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.

    'Emergency'

    The move follows a shortage of wiring harnesses, which Hyundai sources mainly in China, industry officials said.

    Two of the affected suppliers, Kyungshin and Yura Corporation, said they were trying to boost production at their factories in South Korea and Southeast Asia to compensate for the disrupted supply from China. Both also plan to resume production at their Chinese factories after February 9, 2020.

    "We are in an emergency," a Kyungshin official told Reuters.

    Hyundai has seven factories in South Korea, catering for the local market and the United States, Europe, the Middle East, and other markets.

    Its production in South Korea accounts for about 40 percent of the company's global output.

    Hyundai's decision to halt assembly lines at home could delay supplies of its popular sport utility vehicles (SUVs), such as the Palisade and Genesis GV80.

    The carmaker recently turned in its best quarterly profit in more than two years and said it was on track for higher profit margins, aided by increased sales of SUVs.

    The coronavirus outbreak may slow manufacturing activities in the automotive and other sectors, Japanese trading house Mitsui and Co has warned.

    SOURCE: Reuters news agency