Hyundai Suspends S. Korea Output as Coronavirus Disrupts Supply Chain

Hyundai is the first carmaker to idle plants outside China because of the outbreak. It won't be the last.
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Now it begins.

Hyundai is about to become the first carmaker to shut down plants outside China because its supply chain has been disrupted by the country’s coronavirus outbreak. It won’t be the last.

Hold Everything

The South Korean carmaker says it will idle all seven of its domestic assembly plants because it can’t get key components—notably wiring harnesses—from its suppliers in China.

Reuters reports that the closures will start on Friday and run to at least the middle of next week. The shutdown will affect 40% of Hyundai’s worldwide capacity.

Hyundai’s production hiccup may not last long. But it’s the last thing the company needs at this juncture.

The company had been celebrating, at least for a few weeks, evidence that its financial performance was on the mend. In the final quarter of 2019, the company’s revenue grew 10%, operating income doubled and net profits swung from a $1.7 billion loss to a $7.2 billion gain.

Bad Omen?

Hyundai felt the pinch right away because its relatively short supply lines to China enable factories in Korea to operate with tight inventories.

Not so much for plants in Europe or the U.S. Their longer supply pipelines contain more parts in transit, so the effect of a production problem in China may not be felt immediately.

With luck, any disruptions those facilities encounter will be short and inconsequential. If not, affected companies will be shopping for new suppliers.

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