S. Korea’s car production growth to slow in 2019 due to slump in foreign managed car brands

South Korea’s overall auto production in 2019 is expected to grow at a slow pace as there is no sign of a recovery in production at the local units of three foreign-owned automakers – GM Korea Co., Ssangyong Motor Co., and Renault Samsung Motors Corp. amid falling demand and labor conflicts.

According to data released by Korea Automobile Manufacturers Association on Sunday, Korea’s auto production reached 2,915,289 units in the first nine months of this year, up a mere 0.5 percent from the same period a year ago. The output for the full year is estimated to stop at around 4 million units, similar to last year’s output of 4,028,705 units, it added.

The slow growth in the country’s total auto production is mainly blamed on a slump in output at three foreign-invested auto manufacturers GM Korea, Ssangyong Motor, and Renault Samsung Motors.

GM Korea, the Korean unit of U.S. auto giant General Motors Co., churned out 304,756 finished vehicles in the January-September period, down 7.7 percent from 330,030 units last year and lowest in 14 years since 258,551 units in the same period in 2005. Its January-September output has declined for the sixth consecutive year.

In September alone, GM Korea produced the smallest number of 17,491 vehicles since 15,578 units in August of 2003 due to labor union strike and Chuseok national holiday that led to fewer working days. It is the first time for its monthly production to fall below 20,000 units since 2004.

Worse yet, the production outlook for GM Korea remains gloomy.

The Korean unit has been suffering from falling demand for its cars in Korea and constant conflicts between the union and the management.

The labor union has recently agreed not to take industrial action, but it could go on strike again any time because it has not yet reached any agreement with the management. GM Korea’s labor union has simply halted wage negotiations with the management after deciding to pass the ball over to the next union executive for talks. Its parent company in the U.S. also has been grappling with nearly a monthlong walkout that has halted work at the company’s U.S. factories, making things even more difficult for the Korean unit.

Sales of GM Korea also fell 9.5 percent in the January-September period from a year ago.

Auto production at Ssangyong Motor owned by India’s Mahindra & Mahindra Ltd. also declined 0.4 percent on year to 100,755 units in the first nine months. It marks the lowest output in seven years since 86,002 units in 2012 due to the falling sales.

Renault Samsung Motors, the local unit of French automaker Renault S.A. that had suffered from a nearly yearlong wage dispute between the union and the management until June, also produced 123,920 units in the January-September period, down 24.9 percent from 164,955 units in the same period last year. It is the smallest output in five years since 2014.

The decline is largely owed to a cut in production of the Nissan Rogue at its labor strike-ridden Busan plant – from about 100,000 units last year to 60,000 units this year. Since last week, Renault Samsung Motors lowered its units per hour (UPH) by 25 percent from previous 60 units to 45 units to cope with slashed production.

The automaker’s output won’t likely recover next year after it has failed to receive any additional order for the Nissan Rogue. Nor has the French parent made its decision on allocating new XM3 compact sport utility vehicle (SUV) orders. The Korean unit has been striving to secure export orders of the XM3 bound for the European market to fill up the lines that could be left idled after the Rogue exit. But Renault’s factory in Spain is also competing hard to win the order.

Meanwhile, Korea’s two largest automakers Hyundai Motor Co. and Kia Motors Corp. are faring better.

Kia Motors produced 1,086,075 units in the January-September period, up 2.9 percent from the same period last year. It is the smallest output, however, since 2010 when excluding last year’s figure.

Hyundai Motor produced 1,294,691 units in the first nine months of this year, the largest in four years since 2015, as it avoided a worker strike for the first time in eight years.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]