"The Most Frightening Thing Is Not Knowing When It Will End"... Partner Companies Struggling with COVID-19

[Asia Economy Reporter Kiho Sung] "This is the first time we have experienced such a situation, so we are just at a loss. Most factories of parts suppliers for Hyundai, Kia, Ssangyong, Renault Samsung, and Korea GM are at a standstill. Last year, the completed car industry barely survived due to strikes, and now with the unexpected China-related crisis this year causing the completed car factories to stop, there is no production volume. Moreover, it is even more frightening because we do not know when this situation will end."

As the spread of the novel coronavirus infection (Wuhan pneumonia) causes domestic completed car production lines to stop one after another, parts suppliers are suffering from the aftershocks. Although Hyundai and Kia announced an emergency injection of 1 trillion won to parts suppliers, the anxiety among suppliers is not easily alleviated. This is because the uncertainty about how long this situation will continue is growing. The completed car industry has set a policy to sequentially resume factory operations starting from the 11th, beginning with Hyundai, but it is difficult to predict when the factories of parts suppliers producing wiring harnesses in China will resume operations.

A representative of Kia’s A parts supplier in Gwangju said, "We have been holding emergency meetings since morning to come up with countermeasures, but no effective solutions have come to mind," and added, "Since this is the first time such a thing has happened, we have no sense of how to respond." He expressed, "We had somewhat anticipated this since other completed car companies had already declared shutdowns, but when it actually happened, all aspects such as inventory and funds are equally overwhelming."

The most painful part for parts suppliers is that it is difficult to obtain information related to the novel coronavirus infection and there is no certainty about how long it will last. Another parts supplier representative in the Gwangju area explained, "We cannot get any information, so we are only looking at the media now," and added, "The most painful thing is that this situation cannot continue indefinitely."

Voices demanding strong government measures are also growing louder. A representative of B parts supplier delivering to Hyundai in Ulsan said, "There was a meeting hosted by Ulsan City on the 5th, but there were no measures," and criticized, "The government measures announced today are hardly fundamental."

When a completed car company goes on shutdown, parts suppliers inevitably suffer direct impacts. This is because the parts and quantities desired by the completed car company vary depending on vehicle options, making it impossible to produce before orders are placed. Also, even if production is done, there is the problem of storage space until delivery. Furthermore, these difficulties are felt more severely by second- and third-tier parts suppliers with poor financial conditions.

According to the Korea Automobile Industry Cooperative, as of 2018, there are 831 first-tier parts suppliers directly trading with completed car companies such as Hyundai, Kia, Korea GM, Renault Samsung, and Ssangyong. Including second- and third-tier and general purchasing suppliers, the number is estimated to be in the tens of thousands. A representative of B parts supplier emphasized, "First-tier suppliers have been operating factories to secure inventory, but recently some companies are reducing operating lines," and added, "If the situation prolongs, financial difficulties for second- and third-tier suppliers are inevitable."

This content was produced with the assistance of AI translation services.