Korean-automakers-face-existential-crisis
Shown above is Hyundai Motor's Beijing plant. The automaker thinks of suspending some of its production lines there due to declining demands. Courtesy of Hyundai Motor

The Korean automotive industry faces a life-or-death crisis as all of the nation’s five players are suffering from big problems with no light visible at the end of a long, dark tunnel.

The country’s two biggest automakers of Hyundai Motor and Kia Motors have experienced sales slumps over the past few years due to declining demand and stiff competition both in the local and international markets.

In particular, the Seoul-based duo have languished in China. Hyundai’s market share there was more than 20 percent in the early 2010s, but has more than halved to less than 10 percent.

Against this backdrop, the company is considering suspending operations at its Beijing factory and substantially cutting its payroll.

What is worse is that employees of the two auto companies seemingly do not care about the hardship as their unions keep asking for prohibitively high bonuses and engagement in the management without cooperating in a full-fledged manner for a turnaround.

Hedge fund Elliott Management is feared to hammer the final nails into the coffins of the two firms – the New York-based outfit purchased around 3 percent of the shares of Hyundai Motor and its affiliate Hyundai Mobis, and is now asking for a huge one-off dividends payment and the appointment of five outside directors.

Things are not so good for the other two major carmakers of Renault Samsung and GM Daewoo.

The former has been in talks with its union since June 2018 but could not reach a settlement after 10 months. It even failed to keep the March 8 deadline for a management-labor agreement set by the firm’s owner, France’s Renault.

This will weigh on the company, especially its Busan plant.

Last year, the plant rolled out slightly more than 215,00 vehicles and around half of them were the Rogue compact crossover, which was produced under contract with the Renault group. This deal ends in September and Renault is unlikely to renew it.

The Rogue helped the Busan plant bounce back from a long slump; but it saw production of the utility vehicle plunge more than 40 percent during the first two months of this year from a year ago due to partial strikes by the union.

GM Daewoo continues to reduce its production of vehicles and payroll, causing suspicions that the U.S. automotive giant is seeking an exit from the country.

In the case of a minor automaker, Ssangyong Motor, it has been stuck in a deficit since 2017 due to disappointing exports. Its owner Mahindra & Mahindra is nevertheless trying to turn around the money-losing company.

 

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