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Korean carmakers on track to normalize production this week

(Yonhap)
(Yonhap)

South Korean carmakers said Monday they are on track for normalizing production later this week after suffering parts shortages from China amid the spreading coronavirus outbreak.

The country's five carmakers -- Hyundai Motor Co., Kia Motors Corp., GM Korea Co., Renault Samsung Motors Corp., and SsangYong Motor Co. -- are still struggling to get parts on time, although suppliers in China partially resumed operations last week with the COVID-19 virus outbreak showing no sign of slowing.

They said they will be able to operate all of their assembly lines though they plan to adjust production volumes depending on supplies from China, where utilization rates have yet to fully recover.

Hyundai Motor Co. and its affiliate Kia Motors Corp., the country's two biggest carmakers, partially restarted production at their domestic plants Tuesday, mainly using auto components shipped from Southeast Asia.

"Some parts from Southeast Asia that arrived at the plants last Monday helped Hyundai and Kia (partially) restart production at their plants. As South Korean suppliers that have plants in China also resumed production last week, the carmakers expect to fully operate their production lines on Friday," a Hyundai Motor Group spokesperson said.

Most of Hyundai's domestic passenger vehicle plants are operating normally, though the Jeonju plant, which assembles commercial vehicles such as buses and trucks, will remain halted until Thursday, the spokesperson said.  

Hyundai said it will initially focus on the production of popular models -- including the flagship Palisade sport utility vehicle and the GV80 SUV sold under its independent Genesis brand -- to meet rising demand and for exports to the United States.

Kia said it expected most of its local plants to be in operation from Thursday.

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.

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 US, Slovakia, Mexico and India.

Their overall capacity is 3.84 million units.

Hyundai and Kia's plants in China began partial production from early last week after an extended Lunar New Year break from Jan. 24 to Feb. 9. But their other overseas plants remain unaffected by the virus.

Hyundai and Kia halted all production at their domestic plants on Feb. 7 and kept them suspended through Feb. 10 in light of their China-based suppliers' suspensions that started at the outset of the Lunar New Year holiday there on Jan. 24.

It was the first time that Hyundai Motor had suspended all of its domestic plants since 1997, when the Asian financial crisis affected local manufacturers and Mando Corp. stopped supplying parts to the carmaker.

The carmakers plan to import parts from companies in Southeast Asia for the time being as it may take time for their suppliers in China to return to full production amid the potentially deadly respiratory illness.

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

Three other local carmakers have all resumed operations as their Chinese suppliers began production last week.

SsangYong Motor resumed the operation of its sole plant in Pyeongtaek, 70 kilometers south of Seoul, on Thursday following suspension from Feb. 4-12. Renault Samsung also began production at its sole plant in Busan, 450 km south of Seoul, on Monday after a suspension from Feb. 11-14.

GM Korea said its production had not been affected by the coronavirus outbreak but that it will suspend some of its lines at its main Bupyeong plant in Incheon, just west of Seoul, from Monday to Tuesday.

"Production will begin on Wednesday as parts from China are scheduled to be delivered early this week," a company spokesman said.

As the suspension period at the carmakers did not last for more than a week, industry people and analysts expect no major drag on the carmakers' business results for the January-March period as they will be able to fill the output gap through overtime work.

South Korean officials and Hyundai Motor Group had asked the Chinese authorities to help manufacturers in China resume operations this week to avoid supply chain disruptions for their corporate customers.

The Ministry of Trade, Industry and Energy said it will take all necessary steps 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 30 confirmed coronavirus cases as of Monday. (Yonhap)

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