Many Factories Closing... Next Is My Turn

[Report] Visiting Small and Medium Manufacturing Complexes Silently Collapsing

On the 28th, an employee is working at the factory of automobile parts company B in Cheonan, Chungnam. Due to the impact of COVID-19, B's exports were blocked, causing sales to plummet and half of the employees to go on leave.

[Asia Economy Reporters Kim Jong-hwa and Kim Hee-yoon] #A factory of mold manufacturing company A located in Siheung-si, Gyeonggi-do. The mold manufacturing machines are busy operating, but half of them are stopped. Due to the impact of the novel coronavirus infection (COVID-19) earlier this year, the workload from the second-tier vendors of finished cars has decreased by more than half. To survive, the company has shifted its focus to producing showerhead parts, a daily necessity product, but it is insufficient to cover the losses. To prevent shutdowns, employees are working in two shifts. A's sales in the first half of this year dropped by more than 30% compared to the previous year. The company's president sighed, saying, "(If the resurgence continues) the only option is to close the factory, but since this is not a job that can be done remotely, it will practically come to a complete stop."

#B, an auto parts manufacturer in Cheonan-si, Chungnam, saw about half of its 200 employees take leave of absence in June and July due to sluggish exports of finished cars caused by COVID-19. They barely managed to survive for two months with government subsidies related to leave, but recently, they have divided the working staff into three shifts to minimize personnel and are establishing measures to prevent factory shutdowns. The factory manager said, "If the situation prolongs, cash flow problems will arise, and we will inevitably face many concerns."

Working in 2-3 shifts to prevent shutdowns

"More and more companies around us are closing down. I am deeply worried that we might be next."

On the 28th, Kim Jong-hee (alias), president of a company in Namdong Industrial Complex, Incheon, lamented that the resurgence of COVID-19 is pushing them into the worst situation. As the spread of COVID-19 shows no signs of slowing, the situation for small and medium-sized manufacturers is becoming increasingly difficult. The biggest concern voiced by these SMEs is the prolonged COVID-19 pandemic. They have managed to endure so far, but the problem is that they have no capacity left for the future.

Kim Young-bae (alias), CEO of pallet manufacturer C in Hwaseong, Gyeonggi-do, said, "We are working while wearing masks and maintaining social distancing, but if the situation worsens, deliveries will stop, and it will be a big problem," adding, "The government says it supports SMEs, but we don't feel it at all."

On the 28th, an employee is working at company C, a pallet manufacturer located in Hwaseong, Gyeonggi-do. Company C increased its export volume to offset the decline in domestic orders, but is considering a temporary shutdown due to the resurgence of COVID-19.

D, a sensor parts manufacturer in Gunpo, Gyeonggi-do, is considering a shutdown due to the resurgence of COVID-19. Sales have already dropped by 75% compared to last year as finished car companies suffer export hits. The urgent funds secured early this year are the background for considering a quick shutdown.

CEO Choi of this company said, "Even during the IMF foreign exchange crisis and the global financial crisis, it was not this bad, but if the recovery takes 2-3 years like then, we might have to consider closure or other options," and criticized, "Government support policies for SMEs are difficult to apply on the ground and are more like a shiny but sour fruit."

Government says it supports... but no real impact felt

Experts believe this crisis will not be easily resolved. They diagnose that, for now, reliance on additional government support is inevitable. Kim Myung-jin, senior researcher at Gyeonggi Economic Science Promotion Institute, said, "A survey of 700 companies in Gyeonggi-do in May and June showed the situation is more serious than during the IMF crisis," adding, "Small-scale manufacturers were more affected; over 70% of the surveyed companies were small businesses, and basic material, processing assembly, and daily life-related manufacturers were particularly struggling."

Researcher Kim advised, "Providing emergency funds to prevent bankruptcies is the way, but from the government's perspective, it is not easy to choose policies when it is unclear how much and until when funds should be injected," and suggested, "Just as IT companies are supported through the New Deal, separate support measures should be prepared for small businesses."

Joo Won, head of the Economic Department at Hyundai Research Institute, said, "If the situation worsens to level 3, the crisis will be prolonged," adding, "Exports cannot be guaranteed, and domestic demand is damaged, so manufacturing, especially SMEs, will suffer greater damage." He said, "Government support is the solution in the current situation, but the problem is that government support only helps companies survive because their performance is poor," and added, "Targeted support may be necessary depending on the situation." If 100 companies are at risk of bankruptcy, government support should focus on saving even the better-performing companies to reduce damage.

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