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Hyundai hit again by supply disruption in China, one plant halted

After a supplier refused to provide parts due to delays in payment

Reuters  |  Seoul 

Hyundai hit again by supply disruption in China, one plant halted

South Korea's Motor said it had suspended production at one of its factories on Tuesday after a supplier refused to provide parts due to delays in payment — its second such incident in as many weeks.

Frayed relations with suppliers to its venture with Motor Corp Ltd are adding to headaches for in China, where it has seen sales slump due to diplomatic tensions between the two nations and fierce competition from local brands.

Supplier sources familiar with the matter say that is in charge of payments and has been responsible for the delays.

The partners are fighting over their supplier strategy with favouring shifting to cheaper Chinese firms in the face of intense competition, while wants to protect its South Korean supply chain, people familiar with the dispute said.

declined to comment on the reason for the failure to pay suppliers. A representative for could not be immediately reached for comment.

Their joint venture had only just resumed production at four plants on Aug. 30 after a suspension of about a week because one French supplier refused to provide fuel tanks due to non-payment.

This time, a German firm has refused to provide parts for air intake systems, a representative for said, declining to identify the supplier. The joint venture's three other Chinese factories remain operational.

Any loss of production from this one factory is unlikely to have a major sales impact as probably has sufficient inventory at the plant because its cars have not been selling well, said Ko Tae-bong, an analyst at Hi Investment & Securities.

"That is manageable. But if Hyundai's Chinese partner is refusing to make payments, that's a different story," he said, adding that the issue could occur time and time again.

Scrambling to tackle problems in China, said this week it had appointed a new head of its operations. Tao Hung Than, who is of Chinese descent, took the helm effective Friday replacing Chang Won-shin, who lasted less than a year in the job.

The new CEO, however, has a huge task in front of him if he is going to get back on track in the world's biggest auto market — one that accounted for nearly a quarter of Hyundai's revenue in the last financial year.

A weakening brand image and a product line-up without attractive SUVs are only adding to pain from diplomatic tensions. Hyundai's sales from its Chinese factories plummeted 64% in April-June first quarter, when the automaker posted its smallest quarterly net profit in five years.

South Korean firms have been by a Chinese backlash over Seoul's decision to deploy a US missile defence system to counter threats from nuclear-armed North Korea. says the system poses a threat to its national security.

and were also due to start operations at a fifth car factory late last month but the timetable has been pushed back. has declined to comment on the postponement.

Motor shared fell 1.4 percent to their lowest level since April 19 on Tuesday and have declined 4.2% since the first reports of the supply disruptions emerged a week ago.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, September 05 2017. 15:10 IST