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Hyundai, Kia see woes in U.S., China get worse

Sept 13,2017
The annus horribilis for Korea’s top automaking duo - Hyundai Motor and Kia Motors - continues as factories were closed by a natural disaster in the United States and Kia dealers in China are demand compensation for the collapse of sales in the Chinese market.

Hyundai Motor’s factory in Alabama and Kia Motors’ in Georgia decided to close earlier this week in the wake of Hurricane Irma’s landing in Florida on Sunday, local time. The monster hurricane has been moving north, hitting Georgia and Alabama on Monday and Tuesday.

“We decided to suspend the assembly lines in the United States starting on Monday for 48 hours,” said a spokesperson from Hyundai and Kia. “Hyundai’s Alabama plant closed down as of 14:45 on Monday, local time, and Kia’s Georgia plant stopped production earlier at 6:45 local time.”

Yonhap News Agency reported Tuesday that Hyundai and Kia may expect a combined production loss of as many as 4,700 vehicles. The spokesperson from Hyundai and Kia said the loss was not an official figure and that it is difficult to project the precise loss in production since volumes vary day by day. The production halts in the United States came after shutdowns of an entirely different sort in China.

In late August and again in September, factories of Hyundai - three in Beijing and one in Cangzhou, Heibei - suspended operations temporarily after a local supplier refused to supply parts. Hyundai is also reportedly in a dispute with its local partner BAIC Motor. BAIC owns a 50 percent share of Beijing Hyundai, the company’s Chinese unit.

Hyundai and Kia are already struggling with sales declines sparked by the political row between Beijing and Seoul over the deployment of an American anti-missile shield. During the first half of this year, Hyundai’s sales in China fell by about 40 percent and Kia’s 54 percent compared to a year earlier.

Late Monday, Bloomberg News reported that “dealers in China say they’re losing thousands of yuan on every Hyundai sale because of steep discounts, and some may drop the brand.” The report added that a dealer for Kia may be asking the company to provide 800 million yuan ($122 million) as “aid because of low sales.”

The dealer is considering removing Korean cars from the floor entirely and focus on selling non-Korean brands instead, the report added.

“Unlike Hyundai Motor, local dealerships for Kia Motors only sell completed vehicles [produced outside of China such as Korea],” said the Hyundai and Kia spokesperson. “There are hundreds of local dealers for Kia and we believe only few of them are demanding the said compensation.”

Citing the myriad of difficulties in China, S&P Global Ratings downgraded the outlook for the Korean carmakers from stable to negative over the weekend.

Aside from challenges outside Korea, the carmakers are facing problems with their labor unions, including the recent loss of a lawsuit by Kia that could cost the company as much as one trillion won ($886.4 million) in worker compensation.


BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]