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Hyundai plant suspended in China, again

Overdue payment caused 2nd shutdown in less than a month
Sept 06,2017
One of Hyundai Motor’s Chinese plants came to a halt on Tuesday due to a supply shortage, its second shutdown in less than a month.

Hyundai Motor said its factory in Cangzhou, Heibei, was suspended on Tuesday morning after a German supplier that makes air intakes refused to provide parts because of delayed payment from Hyundai’s Chinese partner.

The overdue payment is estimated to be 18.9 billion won ($16.7 million).

“The supplier hasn’t been paid for about three to four months,” the spokesman at Hyundai Motor’s Seoul headquarters said.

“We expect the factory to resume operation very soon but cannot make any concrete estimation,” the spokesman added.

It has been only a week since four of Hyundai Motor’s Chinese factories - three in Beijing and one in Cangzhou - resumed operation after they were shut down when a local supplier that makes fuel tanks didn’t provide parts due to delayed payment, also reported to amount to 18.9 billion won. The four factories had been shut for about a week.

Although they resumed production on Aug. 30, the delayed payment hasn’t been resolved yet.

“Hyundai Motor is constantly negotiating with BAIC Motor to pay the suppliers but we don’t know if it will end up with a good result,” the spokesman said.

Hyundai Motor’s Chinese unit Beijing Hyundai - a 50-50 joint venture between Hyundai Motor and BAIC Motor - has been facing a severe sales decline in China ever since Seoul decided to deploy the U.S.-led Terminal High Altitude Area Defense antimissile system early this year. Negative consumer sentiment towards Korean companies as well as Hyundai’s miscalculated local strategy have simultaneously hit the carmaker, resulting in a more than 40 percent year-on-year sales drop in the first half of the year.

The local unit’s finances - including paying suppliers - are handled by BAIC Motor, Hyundai Motor said.

The domestic auto industry is facing its biggest crisis to date with multiple internal and external factors simultaneously impacting car makers including the victory of Kia Motors’ labor union in a suit over including bonuses as ordinary pay and the ripple effect the decision will have.

On Tuesday, the labor union of GM Korea said it will go on a partial strike after failing to come to an agreement over wage raises with the company.

The union asked for a base pay raise of 154,883 won and a transition from the current eight-nine hour two shift working system to an eight-eight hour two shift working system. Its labor union also won a legal battle Monday over including bonuses as ordinary pay. The High Court ordered GM Korea to compensate its workers with a total of nine billion won.

Kaher Kazem, the newly appointed CEO of GM Korea, met with company executives at its Bupyeong plant in Incheon on Tuesday to discuss the latest issues the company is facing.

GM Korea has been hit by constant rumors that it is planning to withdraw from the local market, especially since former CEO James Kim abruptly announced his resignation in July. The Korean unit of the Detroit-based auto giant has been generating an accumulated loss of more than 1 trillion won for the past three years.

Kazem met with the company’s labor union on Aug. 22 prior to officially taking office on Sept. 1.


BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]