Korean Economy News
Korean auto crisis: 60% of suppliers facing streamline, 70% liquidity crisis

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South Korea’s automaking habitat is coming down, with 60 percent of parts suppliers to Korea’s finished carmakers forced to shed workers as 72 percent struggle in liquidity woes amidst shriveled workload.

Maeil Business Newspaper’s survey on 55 automotive suppliers in Korea showed that 33 firms or 60 percent was readying massive layoffs or furlough.

The survey was conducted at end of June on suppliers to finished carmakers including Hyundai Motor, Kia Motors, Renault Samsung, GM Korea.

Of the 33 planning downsizing, 11 mulls 20 percent cut in payroll and eight 30 percent rollback. One thinks it would have to let go half of its workforce.

Jobs in the automotive sector have taken huge toll from the COVID-19 pandemic that nearly halved global shipments.

Mando Corp, Korea’s second largest automotive parts supplier, in the second quarter launched a voluntary redundancy program for production line workers for the first time since 2008 global financial crisis. Other major auto parts makers Kumho HT and Daihan Calsonic also slashed their workforce.

Foreign names are no better.

Gates Korea, which supplies industrial belts to Hyundai Motor and Kia Motors, announced last month that it was closing all production lines in the country for the first time in 31 years since the Korean unit of U.S-based automotive parts maker Gates Corp began operation.

AVO Carbon Korea, motor brush maker, recently dismissed 13 factory workers out of 80 staff.

Korean car shipments are estimated at 3.2 million units this year, below the 4 million threshold necessary to sustain the automaking segment. This year’s output would be the smallest since 3.17 million in 2003.

Automobile industry is responsible for 1.9 million jobs, including 260,000 in the parts sector.

The survey also showed 72 percent of the suppliers were in immediate liquidity shortage.

By Kang Gye-man, Lee Jong-hyuk, Park Yun-gu, and Cho Jeehyun

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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