Supply disruption forces Hyundai Motor to suspend production at China facility
06 Sep 2017
South Korea's Hyundai Motor suspended production at a facility in China yesterday after a supplier refused to provide parts due to delays in payment - its second such incident in as many weeks.
Strained supplier relations at its venture with China's state-owned BAIC Motor Corp Ltd, Beijing Hyundai, have worsened outlook as sales skid due to diplomatic tensions between the two nations and fierce competition from local brands.
According to suppliers familiar with the matter, BAIC is in charge of payments and has been responsible for the delay, Reuters reported.
The bone of contention is supplier strategy with BAIC favoring shifting to cheaper Chinese firms in as competition increases, while Hyundai wants to protect its South Korean supply chain, Reuters reported citing people familiar with the dispute.
Their joint venture resumed production at four China plants on 30 August following suspension of about a week after a French supplier refused to provide fuel tanks due to non-payment.
The operations have been suspended this time after a German firm refused to provide parts for air intake systems, according to a representative for Hyundai said, who declined to name the supplier. Operations at the other three facilities have not been affected.
According to commentators, the shutdowns are the latest troubles for Hyundai in China, where its first-half sales dropped 42 per cent amid a consumer backlash over political tensions and failure to introduce more popular car models. Additionally, sales are also down due to heavy discounting by rivals. The company appointed a new chief last week following the first round of shutdowns which included all operational factories in the country.
Beijing Hyundai has five plants in China, of which the latest in Chongqing has not yet started operations. Operations are not affected at three operational plants due to sufficient availability of air-intake parts according to a Hyundai spokesman said, Bloomberg reported.
