Korea vows to provide 'sufficient liquidity' to auto industry

Unsold vehicles at a Hyundai dealership in Colorado, U.S. / AP-Yonhap

By Kim Yoo-chul

The government has vowed to provide “sufficient liquidity” to the ailing auto industry. With ongoing production shutdowns taking effect, the country's automotive companies are seeking to navigate the coronavirus pandemic.

“Production problems in one or two suppliers, if any, would hit the overall production mechanism in the automotive industry,” Industry and Trade Minister Sung Yoon-mo said at a meeting with executives of the country's top-tier automotive companies and their parts suppliers, in Seoul, on Tuesday afternoon.

“The government is going to provide sufficient liquidity for auto parts suppliers and the overall industry to help them navigate the pandemic.”

The ministry did not give details about the “new liquidity support” or what specific forms it might take. The assistance is part of 29.6 trillion won additional financing announced on April. 8 to help the ailing local automotive parts suppliers and the overall industry as COVID-19 spreads.

As the minister said, the automotive industry includes not only the leading car manufacturers but also a variety of companies whose core businesses are closely related to the manufacturing, or marketing of automotive parts, vehicles and designs.

Therefore, the epidemic's impact on the automotive supply chain is substantial. The deeper into the supply chain, the greater the impact of the pandemic will be. Given this situation, first-tier, second-tier and third-tier suppliers to automakers with global supply chains such as Hyundai-Kia will be most affected by virus-related disruptions.

“Let me tell you that the government is very closely monitoring the situation,” the minister said. “If necessary and needed, the ministry will review adjusting previously announced financial assistance plans.”

Top and senior executives at Hyundai Motor and its sister affiliate Kia, General Motors Korea, Renault Samsung and SsangYong attended the meeting, according to press release from the ministry.

Admitting that overall vehicle production in April would fall by about 30 percent, the minister said the ministry did not expect the industry to have a “meaningful and significant” rebound in production and outbound shipments in May and June.

According to the trade ministry, vehicle manufacturing factories in Europe, the United States and India were closed. Of 313 factories operated by 14 global carmakers, including Volkswagen and BMW, 242 factories were shut down as of April 16, the ministry said.

The auto industry is capital-intensive and constitutes one of the most important market sectors for the South Korean economy. It is one of the largest sectors and considered a bellwether of both consumer demand and the health of the overall economy with the shipbuilding, tech and chemical industries.

Specifically, Hyundai-Kia's six plants in the United States, India, Brazil and Mexico stopped operations due to the pandemic directly affecting local parts suppliers. Europe and the United States take up about 70 percent of South Korean car manufacturers' exports and 54 percent of South Korean parts exports, government figures show.