Fresh China worries hit Hyundai, suppliers even as plant restarts (VIDEO)

SEOUL, Sept 8 — Shares in Motor and its suppliers slid today on fresh worries over their position in after highly critical state newspaper comments, even as the South Korean automaker managed to get a car plant restarted.

Hyundai has been at odds with partner BAIC Motor over supplier strategy, sources have said — a rift that appears to be at the root of some of its parts makers not being paid on time, leading to plant stoppages.

Sources have told Reuters that BAIC wants to shift to cheaper Chinese suppliers to cut costs amid intensifying competition in the world’s biggest auto market, while Hyundai wants to protect its current supply chain.

The problem has become a major headache for Hyundai which is also grappling with fierce competition and a less than stellar product line-up — a host of difficulties that prompted S&P Global Ratings to cut its outlook for the automaker and affiliate Kia Motors Corp today.

Its China woes were thrust into the spotlight again as the Global Times, in an article in its English edition yesterday, cited unidentified sources as saying BAIC may end its partnership over supplier disputes.

The state-run newspaper followed up with commentary today lambasting Seoul for its decision to deploy the US anti-missile defence system Thaad — a diplomatic standoff that has been hurting Hyundai and other South Korean firms that are highly reliant on the Chinese market.

Labourers work at an assembly line of Hyundai Motor’s plant in Asan in this January 22, 2013 file photo. — Reuters picLabourers work at an assembly line of Hyundai Motor’s plant in Asan in this 22, 2013 file photo. — Reuters pic

Shares in Hyundai suppliers saw some of the worst drops among slides for raft of South Korean firms, as investors feared a shift to Chinese suppliers was underway. Module maker Hyundai Mobis tumbled 4.7 per cent and engine parts maker Hyundai Wia slid 7.1 per cent.

BAIC declined to comment and said it was not aware of the Global Times articles.

Hyundai said in a statement that a cooperative relationship with its partner would continue and “the two companies plan to continue various dialogue to strengthen competitiveness in the Chinese market.”

The automaker’s shares ended down 1.8 per cent and have fallen 6 per cent since reports of the payment problems in China first emerged.

Important partnership

Analysts said Hyundai’s traditional suppliers may find themselves losing business because of the infighting with BAIC, and that the stakes were high for both automakers if they did not work out their problems.

“Beijing Hyundai is Hyundai’s only JV in China, so I feel that it is intuitively very important to Hyundai. BAIC only has two joint ventures, one with Benz and one with Hyundai, and it’s own brand isn’t very good. So Beijing Hyundai to BAIC is of course very important,” said Jefferies analyst Patrick Yuan.

The automaker said earlier in the day that operations at its plant in Hebei province resumed on Thursday afternoon after being suspended since Tuesday — the second time in as many weeks that it has had to halt production at Chinese plants.

“We continue to be in discussions over payment,” a spokesman for the automaker said.

Securities analyst Esther Yim said the internal disputes over suppliers signalled a prolonged crisis for the South Korean automaker.

“Investors are frustrated that Hyundai is just blaming the political situation, and doing little to address the problem. Hyundai is a silent bystander,” she said.

Other companies that slid today as the Global Times referred to Thaad as ‘a malignant tumour’, included Lotte Shopping which fell 3.2 per cent. Its supermarket stores in China have been shut down for months in the wake of diplomatic tensions. Top cosmetic firm AmorePacific also slumped, falling 4.6 per cent.

“Have the conservatives in South Korea eaten kimchi until they’ve become confused?” the unsigned article said. — Reuters

Source: The Malay Mail Online

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