Domino Shutdown by Hyundai Motor Units
The downsizing of Chinese plants by Hyundai Motor Co. and Kia Motors Corp. has a ripple effect on Hyundai Mobis Co.
Hyundai Mobis is said to be closing down its Module Plant 1 in Beijing at the time when Hyundai Motor shuts down its Beijing Plant 1, according to automaker and component industry sources on March 13. Hyundai Mobis has production plants around five of the six Hyundai Motor’s Chinese production bases, except one for commercial vehicles. Hyundai Mobis’ Beijing Module Plant 1 supplies components to Hyundai Motor’s Beijing Plant 1.
An official from Hyundai Mobis said, “Hyundai Motor, Kia Motors and Hyundai Mobis cannot but face the same fate as Hyundai Motor and Kia Motors’ production and operation systems are closely connected with those of Hyundai Mobis.”
In fact, Hyundai Mobis has not added more employees at not only the Beijing Mobis Module Plant 1 but also the Jiangsu Mobis Module Plant 1 since employees there voluntarily resigned last year. The company has also run a flexible workforce management system by using some temporary workers for the required workforce. This can be seen as its strategy to manage the workforce considering restructuring. Hyundai Mobis currently has a total of 700 employees – 500 for the Beijing Mobis Module Plant 1 and 200 for the Jiangsu Mobis Module Plant 1.
It is now a fait accompli that Hyundai Motor’s Beijing Plant 1 will be closed down as it has reduced the number of its 2,000 workers at a fast pace through voluntary retirement and relocation from January this year. In this case, the Beijing Mobis Module Plant 1 will go through a shutdown process next month at the earliest due to the absence of buyer. Jiangsu Mobis Module Plant 1 will also share its fate with Kia Motors’ Yancheng Plant 1 which will stop all the production lines.
The Beijing Mobis and Jiangsu Mobis Module Plants supply three modules to Hyundai Motor and Kia Motors, respectively, such as braking steering component (chassis module), electronics and airbag (cockpit module), and air conditioning and lamp systems (front end module).
Beijing Mobis Module Plant 1 is a production base established by Hyundai Mobis in 2003 and it has an annual production capacity of 300,000 units. All the output from the plant goes to Hyundai Motor’s Beijing Plant 1. Jiangsu Mobis Module Plant 1 was also set up in 2002 with the entire investment from Hyundai Mobis. The plant has an annual production capacity of 150,000 units and all the modules produced here are supplied to Kia Motors’ Yancheng Plant 1. In short, the two plants has nearly 100 percent of sales dependence on Hyundai Motor and Kia Motors. The rate of operation of Beijing Mobis Module Plant 1 and Jiangsu Mobis Module Plant 1 last year fell short of 50 percent, just like Hyundai Motor and Kia Motors’ plants in China.
Things are not much different in Jiangsu Mobis Automotive Parts Co. The company saw its sales nearly halve from 3.31 trillion won (US$2.93 billion) in 2016 to 1.71 trillion won (US$1.52 billion) in 2017, posting 15.70 billion won (US$13.88 million) in net loss. Its sales also remained at some 1 trillion won (US$884.41 million) last year.