Hyundai Motor Company’s Jeonju plant, which stopped operating due to a cut in parts supply in February. Photo = Hyundai Motor Company
The Korean automobile market did well amidst the difficulties caused by the new coronavirus infection (Corona 19) in 2020, but suffered again from a strike on wages and collective bargaining agreements.
According to the automobile industry on the 25th, the domestic market has stopped supplying parts due to the spread of Corona 19 from the beginning of the year, causing several factories to stop and exports also plummeted. The government’s individual consumption tax (opening tax) was cut short, but the union had to go on strike.
The aftermath of Corona 19, which started in China, hit the domestic automobile industry from the beginning of the year. The supply of wiring harnesses, which are automobile wire products produced in Chinese factories by parts makers, was cut off, and the finished car factory was also stopped. Starting with Ssangyong on February 4 this year, all automakers such as Hyundai, Kia, Renault Samsung, and GM Korea had to temporarily stop production.
In March, at the Automotive Industry Center in Seocho-gu, Seoul, a meeting with the automobile parts industry was held with Sung Yun-mo, Minister of Trade, Industry and Energy. Photo = Reporter Kim Bum-jun [email protected]
Corona 19 from the beginning of the year… Dried up from the root
Although most of the car production shutdowns were cleared up in March, the management conditions of parts suppliers with weak financial resources at this time became more difficult. The Korea Automobile Industry Association analyzed that the average utilization rate of parts makers fell to 50% in February, raising concerns about bankruptcy.
Usually, parts makers operate the company based on the annual production plan of the automaker. If Hyundai Motor plans to produce 130,000 Grandeurs in 2020, parts makers are also equipped with facilities to supply parts for 130,000 units and recruit manpower. In particular, molds, etc., cost a lot of initial investment, so it is evaluated that the production interruption that occurred from the beginning of the year significantly reduced the physical strength of secondary and tertiary partners, which are small and medium-sized companies.
Employees are assembling body parts at Hyundai Motor Company’s Alabama plant production line. Photo = Hyundai Motor Company
Since then, the Corona 19 incident has continued to plague the automotive industry. Foreign automakers such as Daimler, BMW, and Volkswagen, the parent company of General Motors (GM) and Mercedes-Benz, also stopped their factories, and domestic parts makers that exported parts to these companies suffered additional blows.
Hyundai Motor Group’s overseas plants were also unable to avoid the Corona 19 incident. As governments in each country took measures to suspend business operations to prevent the spread of Corona 19, factories in India, the United States, and the Czech Republic were closed at Hyundai Motor Company, and factories in the United States and Slovakia had to be temporarily closed for Kia Motors.
Overseas exports of domestic finished cars also ended. In April, exports of finished cars by domestic companies were 19,6803 units, a 72.6% drop from the previous year. In the second half of the year, the Corona 19 incident subsided and exports recovered somewhat, but the export performance of the domestic finished car industry in January-November this year was only 171,4702 units, down 21.9% from the same period last year. The annual export of 2 million units also collapsed in 16 years.
From July, the government reduced the individual consumption tax cut to 30% and extended the period until the end of the year. Photo = Korea Economic Daily DB
From industry support to opening tax… I was sucked up
From the beginning of the year, automobile production, exports, and parts exports all declined, and the domestic automobile industry began to dry from its roots. However, it was the best compared to overseas. As the small and medium-sized parts industry faced difficulties, Hyundai Motor Group Chairman Eui-sun Eui-sun paid 587 billion won for suppliers up to two weeks earlier, and provided 308 billion won in cash at no interest to search for the domestic industry.
The government’s reduction in opening tax also helped the automobile industry suffer. The domestic automobile market, which had been stagnant, succeeded in a V-shaped rebound thanks to the government’s efforts to increase consumption by reducing the 5% car sales tax to 1.5% by reducing it by 70% in March-June. The performance of the five domestic automakers, which had shrunk to 8,172 units in February, rose 84.8% to 151025 units in the March opening tax effect.
Vehicles are on display at the dealership of Ssangyong Motor. Photo = News 1
The domestic market grew steadily throughout the first half of the year. According to the Ministry of Trade, Industry and Energy, the domestic sales volume in the first half of the year recorded 93,464 units, an increase of 7.2% compared to the same period last year. The global automobile market crashed as foreign countries closed factories and stopped sales of dealerships, but Korea has become the only growing automobile market in the world.
The Korea Automobile Industry Association predicts that the domestic market will reach 1.91 million units this year. In fact, by November, the domestic sales of five domestic finished car companies were 1,473,073, and 245,440 of imported cars were sold, recording a record of 1.17 million. With major auto markets such as the US, Europe and China showing a double-digit stagnation, only the Korean market has grown.
The group association that started in the summer… ‘Peup’ in winter
The auto industry expected to be able to make up for the damage caused by Corona 19, but soon encountered a new barrier.
Of the five domestic automakers this year, three other than Ssangyong and Hyundai Motors were unable to avoid labor-management conflict over the wage negotiations. Ssangyong Motor and Hyundai Motor Co., Ltd. have ended the negotiations with no dispute in consideration of the Corona 19 incident. However, Kia Motors and GM Korea suffered a partial strike, and Renault Samsung continued negotiations over the years.
Kia Motors workers on a partial strike are leaving work after four hours of work. Photo = Yonhap News
GM Korea, which started bargaining negotiations in July last year, concluded this year’s bargaining agreement only on the 18th of this month after a partial strike for a total of 15 days. The strike resulted in a production loss of 25,000 units, and the GM headquarters showed displeasure by showing the possibility of withdrawal from Korea. Eventually, the agreement was concluded within this year, but GM, which has the authority to allocate a new car at the Bupyeong 2 plant in 2022, has been stiffened negatively, raising concerns from the industry.
Kia Motors also went on a partial strike for a total of 14 days four times at this year’s labor union. This resulted in production losses exceeding 30,000 units. The provisional agreement prepared on the 22nd included the freezing of basic pay and 150% incentives, 1.2 million won in encouragement, 1.5 million won for traditional market gift certificates, and restoration of overtime work. The provisional agreement, which was prepared after labor, is scheduled to pass a vote for and against the members on the 29th. If the vote is passed, Kia Motors will also conclude the negotiations within the year.
Employees are coming to work at Ssangyong Motors headquarters in Pyeongtaek, Gyeonggi-do. Photo = News 1
After the sixth working-level negotiations in September, Renault-Samsung’s labor union has been in a state of stalemate with overlapping elections for the union chairman in November. Meanwhile, the Renault-Samsung union failed because it was rejected by a vote for the members of the metals union while attempting to join the metals union, and after receiving a decision to suspend dispute mediation from the Central Labor Committee, a strike was possible only by passing a vote for the members. In the November election for the head of the union, the existing chairman Park Jong-gyu was reappointed, and a hardship was also announced. As negotiations have not yet resumed, Renault-Samsung’s agreement is expected to pass the year.
Ssangyong Motor was in crisis after 11 years. Although the labor and management cooperated to relaunch Tivoli Air and unveil the All-New Rexton, the performance improved in the second half, but it was not enough to overcome the Corona 19 hit, which added to the long-term sluggishness.
In addition, Mahindra’s withdrawal of investment plan worth 230 billion won and delayed sale are struggling to repay bank loans. Eventually, Ssangyong Motor applied for corporate rehabilitation procedures (court administration) to the rehabilitation court. Ssangyong Motor plans to solve the liquidity problem early after completing the sale of the three-month rehabilitation procedure grace period.
Sesung Oh, reporter of Hankyung.com [email protected]
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