[Exclusive] Hyundai Motor Also Halts Factory Due to 'New Coronavirus' Impact... Overtime Canceled This Week

Hyundai Motor Faces Parts Supply Disruptions Due to China's 'New Coronavirus' Impact
Scheduled Overtime This Week Canceled... Affecting Palisade Production
Labor-Management Talks on Factory Shutdown Next Week Planned for Afternoon of 31st

Hyundai Kia Motors Headquarters in Yangjae-dong, Seoul (Photo by Yonhap News)

[Asia Economy Reporter Kim Ji-hee] Hyundai Motor Group has canceled overtime work at its domestic factories. This is because a Chinese company supplying parts to Hyundai Motor has halted operations due to the impact of the novel coronavirus infection (Wuhan pneumonia), resulting in an inability to procure parts. Additionally, only a minimal number of expatriates dispatched to China remain, with the rest being withdrawn. Following Ssangyong Motor, production disruptions at Hyundai Motor have become a reality, spreading the wildfire of the novel coronavirus across the entire Korean automobile industry.

According to industry sources on the 31st, Hyundai Motor decided on the previous day to cancel this week's overtime work at the Ulsan plant and the bus line at the Jeonju plant. This is because the Chinese factories of two companies supplying wiring products to Hyundai Motor have suspended operations. In response, Hyundai Motor withdrew this week's overtime work to address the shortage of wiring inventory and to prevent the spread of the novel coronavirus caused by external visitors.

Earlier, as the novel coronavirus rapidly spread, the Chinese government extended the Lunar New Year holiday by three days until February 2. Subsequently, local governments also extended mandatory holidays for companies by about a week. In the case of Hyundai Motor’s Chinese wiring suppliers, it is reported that the Chinese government ordered a shutdown following the death of a local employee.

Hyundai Motor expects the impact of this overtime cancellation to be limited. Among Hyundai Motor’s production plants, only the Ulsan Plant 4, where the Palisade is produced, had scheduled weekend overtime this week.

The problem starts next week. If no immediate alternatives are found, there is a considerable possibility that all factories may have to be shut down. Currently, Hyundai Motor has only about five days’ worth of wiring inventory. Once the inventory is depleted around February 4, the factories could be shut down for at least a week. Hyundai Motor plans to hold labor-management consultations on various measures, including collective leave, during this period.

A Hyundai Motor official said, "There have been some disruptions in wiring supply, so we decided not to do overtime this week. Since we have safety stock, there is no immediate significant impact on production, but we are reviewing alternatives for the mid to long term."

Concerns are growing that Korean production plants are no longer safe zones from the novel coronavirus. Ssangyong Motor hinted at the possibility of halting operations at its Pyeongtaek plant for the same reason the day before. If the wiring supply issue is not resolved, Ssangyong Motor will also have to suspend operations starting February 4. Korea GM and Renault Samsung Motors are closely monitoring the situation and are considering emergency measures. A Korea GM official stated, "The relevant departments are checking the impact of the novel coronavirus by identifying the supply chains of second- and third-tier suppliers."

This incident has also highlighted the problems of the domestic completed car industry, which had been passive in establishing stable parts supply chains while prioritizing cost reduction. Lee Hang-gu, senior research fellow at the Korea Institute for Industrial Economics & Trade, pointed out, "Domestic automakers have tended to procure products from one or two parts suppliers to reduce costs and maintain only minimal inventory. The novel coronavirus incident will serve as a significant learning experience for the domestic automobile industry if production disruptions occur."