[Asia Economy Reporter Kim Ji-hee] The domestic complete vehicle industry is actively diversifying its parts supply chain to ensure stable product production. The global spread of the novel coronavirus (COVID-19) caused production disruptions lasting several months, leading to the realization that the existing supply chain, which prioritized cost reduction, needed change.
According to the industry on the 27th, Korea GM recently decided to produce and receive wiring harnesses applied to the Trailblazer from Packard Korea, a domestic first-tier supplier. Development related to this is currently underway with the goal of mass production in September. However, due to ongoing parts supply difficulties for the Trailblazer, discussions are underway to advance the mass production schedule.
Until now, Korea GM has procured most of the wiring harness parts for the Trailblazer produced at the Bupyeong 1 plant from the Philippines. However, as the operation of parts factories in the Philippines was disrupted due to the spread of COVID-19, production of the Trailblazer also faced a red light. As a result, the Bupyeong 1 plant has been closed for more than half of its business days for nearly two months since May.
However, Korea GM recently appears to have turned this crisis into an opportunity to diversify its parts supply chain. A company official said, "Since production disruptions have continued since May, we have been discussing various measures related to the parts supply chain." Through these efforts, Korea GM explained that despite the COVID-19 situation in the Philippines not being fully resolved, production disruptions due to wiring harness inventory shortages will be significantly improved starting next month.
In particular, the need to diversify parts suppliers is emerging around the main models of each complete vehicle manufacturer. For some key models, their sales are directly linked to the overall company performance, so it is necessary to respond quickly to market demand.
The Trailblazer is also a volume model for which Korea GM produces the entire global quantity at its domestic factory. If it establishes itself in major automotive markets such as North America, it is expected to provide a definite momentum for Korea GM's recovery. Even now, entering its half-year since launch domestically, waiting lists for delivery continue, and with recent sales starting in the North American region, stable production is urgently needed.
An industry official explained, "Korea GM's recent decision seems to reflect a determination to secure the stability of Trailblazer production even if the vehicle production cost rises somewhat."
The wiring harness is a part that previously caused domestic complete vehicle factories such as Hyundai Motor, Kia Motors, and SsangYong Motor to halt production one after another in February when COVID-19 spread in China. Because many personnel are required for production, supply sources had been concentrated in China or Southeast Asia to reduce costs. This single part caused such a significant impact that it controlled the operation of domestic complete vehicle production lines, highlighting the importance of the parts supply chain. A Hyundai Motor official said, "We are currently reviewing diversification of the parts supply chain in various ways."
However, considering the current reality of the domestic automotive industry, there are also opinions that expanding the supply chain immediately is not easy. An industry official said, "The domestic automotive industry generally operates on exclusive transactions and has a long lifecycle, so it is not easy to change the supply chain," adding, "From the perspective of economies of scale, complete vehicle manufacturers face increased transaction costs, and parts suppliers find it difficult to lower costs if volumes are small, which is also a problem."
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