[Car Talk Forest] Conveyor Belt Gaps... Why Hyundai Motor Keeps the Factory Running

Even with Reduced Efficiency, All-Out Effort to Secure Popular Car Supply

Due to the impact of COVID-19, the supply of Chinese parts was halted, causing some production lines at Hyundai Motor Company to shut down. On the 4th, workers were seen leaving the Hyundai Motor Ulsan Plant (Photo by Yonhap News).

[Asia Economy Reporter Kim Ji-hee] On the 10th, all domestic factories of Hyundai Motor Company stopped operations for the first time in 23 years. This unprecedented situation occurred because the supply of 'wiring harnesses' imported from China to Korea was cut off due to the novel coronavirus infection (COVID-19), making it impossible to continue complete vehicle production. Fortunately, some factories producing these parts in China resumed operations on the 6th, giving Hyundai Motor Company some breathing room. From the 11th, Hyundai's domestic factories reopened, starting with Ulsan Plant 2.

However, something is unusual. Although the restart was ambitious, the 'gong-pitch' phenomenon continues at both the Asan and Ulsan plants. Gong-pitch refers to a situation where the conveyor belt runs empty. Vehicles are supposed to be introduced into the production line according to a scheduled ratio, but even one missing vehicle causes this. The term combines 'bil gong (空)', meaning empty, and 'pitch', referring to unit or interval, and is commonly used in production sites.

Typically, gong-pitch occurs when the order volume (demand) is insufficient compared to the factory's production capacity (supply). Since inventory cannot be accumulated indefinitely, the line is intermittently left empty. But this time, the situation is different. Hyundai's recently released new models are enjoying popularity beyond expectations, causing supply shortages. Popular models such as the Hyundai Palisade, Grandeur, and Genesis GV80 currently require a waiting period of 4 to 10 months even after placing an order.

Hyundai explains that running the factory with empty lines was a decision made after weighing the pros and cons among various options, including temporary shutdowns. However, it seems Hyundai prioritized securing as many units of the popular models mentioned above as possible. The most concerning scenario is delayed deliveries due to production halts leading to customer attrition. If the factory completely stops, production volume becomes zero, but if the line runs, some vehicles can be produced and delivered depending on parts inventory. In fact, Hyundai restarted operations beginning with Ulsan Plant 2, which produces the GV80 and Palisade models with the longest delivery wait times.

Another reason Hyundai chose gong-pitch operation is because it employs a 'mixed-model production' method. Mixed-model production means producing multiple vehicle models on a single line. Since wiring harnesses differ by model, inventory status varies. Hyundai, tasked with expediting deliveries of popular models, is prioritizing securing parts for those vehicles. On lines where models with parts inventory and those without are mixed, gong-pitch inevitably occurs periodically for models lacking parts.

Of course, labor costs were also considered. Most domestic automakers decided to implement temporary shutdowns during this incident and agreed to pay 70% of average wages during this period. Hyundai likely weighed the option of shutting down the factory and paying 70% wages against producing some vehicles and paying full wages. The key factor was how well the vehicles sell. Popular models do not accumulate inventory as they sell quickly. From Hyundai's perspective, even if full operation is impossible, paying slightly higher wages to increase sales is a more attractive choice.

Hyundai is also considering the possibility that this situation may prolong. Since complete vehicle production is currently impossible, the production lines are stopped, but engine and transmission lines remain operational. Once the supply issue of Chinese parts is resolved, Hyundai plans to accelerate vehicle production immediately. Since the lines are running even in a gong-pitch state, normal production can resume at any time.

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