Hyundai Motor, latest Korean company to receive fallout over THAAD deployment

Posted on : 2017-09-01 17:18 KST Modified on : 2017-09-01 17:18 KST
South Korean government planning relief package for firms suffering from Chinese economic retribution
Business leaders from the Korean Chamber of Commerce and Industry meet with Minister of Trade
Business leaders from the Korean Chamber of Commerce and Industry meet with Minister of Trade

On Aug. 31, Hyundai Motor Company President Chung Jin-haeng said that Beijing Hyundai cannot make a unilateral decision about the temporary suspension of operations at four factories in China because the company is a joint venture between Hyundai Motor and BAIC Motor, which each hold a 50% share. The two sides will have to come to an agreement, Chung said.

Chung expressed his concerns during a meeting on Aug. 31 with South Korean Minister of Trade, Industry and Energy Paik Un-gyu and business leaders from the Korea Chamber of Commerce and Industry. “There’s nothing that we can do. The situation needs to be quickly resolved. It’s too much to ask our Chinese suppliers to lower prices by 20% or 30%. Doing that would be a disaster for the more than 150 suppliers who followed Hyundai [to China],” he said.

Starting last week, Beijing Hyundai (Hyundai’s joint venture in China) suspended operations at three factories in Beijing and a fourth in Cangzhou, one after another, before bringing them back online on Aug. 30. The Chinese factories had to shut down because Beijing Yingruijie, a French-Chinese joint venture that is the exclusive supplier of plastic fuel tanks to Beijing Hyundai, discontinued supplies on Aug. 22 after Beijing Hyundai delayed payments for parts. Beijing Hyundai is four months behind on its payments for parts supplied by Beijing Yingruijie.

Since Beijing Hyundai is a joint venture between South Korea and China, Hyundai Motor generally handles production and sales while BAIC Motor handles financial matters. Sources in the industry say that, after Hyundai Motor’s sales plunged as a result of China’s retribution against THAAD, BAIC Motor asked Beijing Yingruijie and suppliers that had entered the Chinese market along with Hyundai Motor to cut their unit price by 20% or 30%. When those suppliers refused to do so, BAIC Motor appears to have delayed its payments.

“We’re negotiating with [Beijing Hyundai] about the payments, Chung said. “Our Chinese business division will work on it.” Chung added that Hyundai can’t do anything on its own in a fifty-fifty joint venture and will have to respect the solution found by Beijing Hyundai.

The South Korean government has launched a fact-finding investigation about South Korean companies supplying parts to Hyundai in order to create an aid package for the companies harmed by the fallout over the THAAD deployment. On Aug. 24, Seoul created a plan for using trade insurance to provide special assistance to several categories of companies: those whose sales or exports to China are down more than 30% year on year, those whose contracts with Chinese buyers have been cancelled and those who have had trouble getting their export goods through Chinese customs. An export credit guarantee will also be used to double the yearly limit for operations and facility funding loans for automobile parts manufacturers that run low on cash because of problems with exports in China.

In addition, this plan will also make it possible for companies whose sales and exports have fallen sharply over the past year because of Chinese retribution following the THAAD deployment to use loan guarantees for producing export goods without curtailment. The government is also planning to expand “group insurance” agreements for export payments with associations and organizations in each industry so that individual companies can be compensated for up to US$50,000 in losses resulting from their inability to collect export payments, even if they have not enrolled in insurance or paid insurance premiums.

By Cho Kye-wan, staff reporter

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