Close Hyundai warns of domestic production halt By Song Jung-a in Seoul Published: May 23 2011 11:16 | Last updated: May 23 2011 19:24 Hyundai Motor has warned of wide-scale disruption at its domestic plants because of a strike at its main parts supplier that will f orce the South Korean carmaker to halt production of most models this week. The unauthorised strike at Yoosung Enterprise, which produces piston rings and cy linder liners, is a blow to Hy undai and its af f iliate Kia Motors, both of which hav e benefited from supply disruptions at Japanese rivals in the wake of the March 11 earthquake. Production of Hy undai’s three sport utility v ehicles – the Tucson IX, Santa Fe and Veracruz – and Kia’s Carniv al has been disrupted af ter unionised workers at Yoosung went on strike last Wednesday . Hy undai said on Monday that it and Kia, which combined are the world’s f if th-largest carmaker by sales, would hav e to today suspend indef initely the domestic production of sedans including the Sonata, Av ante and K5, unless the supply of piston rings resumed. Hy undai receiv es 70 per cent of this key engine part f rom Yoosung. “We will hav e to suspend production of all major models, except some small cars, f rom May 24, when our engine inv entory will be depleted,” Hy undai said. Yoosung has closed its two f actories amid escalating disputes ov er pay and a shif t sy stem. Angry workers hav e occupied f actories by f orce, stopping non-union employ ees f rom working, and the two sides hav e y et to talk, a sign that the strike could be a protracted one. Hy undai has estimated that the strike could disrupt the production of 50,000 v ehicles in May if it continues to the end of this month. At that point, other carmakers in Korea such as General Motors’ Korean unit, Renault’s Busan f actory , and Ssangyong Motor, would also f ace the prospect of hav ing to suspend production. Yoosung supplies about half of the piston rings GM Korea needs and prov ides camshaf ts f or Renault Samsung. Ssangy ong uses Yoosung piston rings f or its large Chairman sedan. The news hit carmakers’ shares on Monday , with Hy undai sinking 5.4 per cent, Kia losing 4.7 per cent, and Ssangy ong closing down 4 per cent. Suh Sung-moon, an analy st at Korea Inv estment & Securities, said that Hy undai had two months of global stocks. More than half of Hy undai’s output comes f rom ov erseas plants. Labour problems hav e of ten been v iewed as a big inv estment risk f or South Korean automakers, which hav e suf f ered f rom f requent strikes ov er the past decades. Howev er, Hy undai and Kia hav e both managed to escape any large labour disputes in recent y ears. Until news of the disruption, shares in the carmakers hav e rallied so f ar this y ear, with Hy undai up 33 per cent and Kia up 38 per cent higher. The two now command a combined US market share of 9.4 per cent, and 5.2 per cent of the European market. Copyright The Financial Times Limited 2011. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others. "FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms F AUTOMOBILES COMPANIES

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Hyundai warns of domestic production haltBy Song Jung-a in SeoulPublished: May 23 2011 11:16 | Last updated: May 23 2011 19:24

Hyundai Motor has warned of wide-scale disruption at its domestic plants because of a strike at its mainparts supplier that will f orce the South Korean carmaker to halt production of most models this week.

The unauthorised strike at Yoosung Enterprise, which produces piston rings and cy linder liners, is a blow toHy undai and its af f iliate Kia Motors, both of which hav e benefited from supply disruptions at Japaneserivals in the wake of the March 11 earthquake.

Production of Hy undai’s three sport utility v ehicles – the Tucson IX, Santa Fe and Veracruz – and Kia’sCarniv al has been disrupted af ter unionised workers at Yoosung went on strike last Wednesday .

Hy undai said on Monday that it and Kia, which combined are the world’s f if th-largest carmaker by sales, wouldhav e to today suspend indef initely the domestic production of sedans including the Sonata, Av ante and K5,unless the supply of piston rings resumed.

Hy undai receiv es 70 per cent of this key engine part f rom Yoosung.

“We will hav e to suspend production of all major models, except some small cars, f rom May 24, when ourengine inv entory will be depleted,” Hy undai said.

Yoosung has closed its two f actories amid escalating disputes ov er pay and a shif t sy stem. Angry workershav e occupied f actories by f orce, stopping non-union employ ees f rom working, and the two sides hav e y et totalk, a sign that the strike could be a protracted one.

Hy undai has estimated that the strike could disrupt the production of 50,000 v ehicles in May if it continues tothe end of this month. At that point, other carmakers in Korea such as General Motors’ Korean unit,Renault’s Busan f actory , and Ssangyong Motor, would also f ace the prospect of hav ing to suspendproduction.

Yoosung supplies about half of the piston rings GM Korea needs and prov ides camshaf ts f or RenaultSamsung.

Ssangy ong uses Yoosung piston rings f or its large Chairman sedan.

The news hit carmakers’ shares on Monday , with Hy undai sinking 5.4 per cent, Kia losing 4.7 per cent, andSsangy ong closing down 4 per cent.

Suh Sung-moon, an analy st at Korea Inv estment & Securities, said that Hy undai had two months of globalstocks. More than half of Hy undai’s output comes f rom ov erseas plants.

Labour problems hav e of ten been v iewed as a big inv estment risk f or South Korean automakers, which hav esuf f ered f rom f requent strikes ov er the past decades. Howev er, Hy undai and Kia hav e both managed toescape any large labour disputes in recent y ears.

Until news of the disruption, shares in the carmakers hav e rallied so f ar this y ear, with Hy undai up 33 percent and Kia up 38 per cent higher.

The two now command a combined US market share of 9.4 per cent, and 5.2 per cent of the Europeanmarket.

Copyright The Financial Times Limited 2011. Print a single copy of this article for personal use. Contact us if you wish to print more todistribute to others.

"FT" and "Financial Times" are trademarks of the Financial Times. Privacy policy | Terms

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