Difficulty Continues in Procuring Raw Materials
Korean companies are delaying the normal operation of their plants in China as the Wuhan coronavirus outbreak has not subsided. They are hampered by local governments’ demanding guidelines, a shortage of manpower, and problems in the supply of raw materials and parts arising from logistics paralysis. Plants in Korea are also extending shutdowns due to disruptions in the procurement of parts from China.
Hyundai Motor and Kia Motors decided to extend the suspension of their Korean plants on Feb. 10. In the case of Hyundai Motor, Ulsan Plant 2, which produces popular models such as the Palisade and the GV80, will resume normal operations on Feb. 11. Line 1 of Ulsan Plant 4 and Asan Plant will begin to operate normally from Feb. 12. The other plants will restart between Feb. 12 and Feb. 27. Kia Motors will suspend the operation of Sohari Plant and Gwangju Plant 2 from Feb. 12 to 13 and close down Gwangju Plant 3 from Feb. 12 to 14.
It is also unclear when plants in China will go into normal operation. Samsung's Tianjin, plant, which makes TVs for consumers in China, had to put off the start of normal operation by one week after receiving a recommendation from the local government. The local government, which has the authority to approve operations, is tightening safety measures for disease prevention. The Tianjin plant is scheduled to restart on Feb. 19 but this could be delayed depending on the local government’s policy. The central government transfers its responsibilities to local governments, and officials of local governments are passive in responding to business activities. "Our plant is ready for operation, but local governments have different policies, so we are waiting," a Mando official said. Of 10 LG Electronics plants in China, three plants are waiting for approval from their local governments. The three are an air conditioner plant in Tianjin, an LCD plant in Hangzhou and a compressor plant in Qinhuangdao. Hanwha Q CELLS is also waiting for the local government's decision.
They are also faced with problems in the return of workers and the procurement of parts and raw materials. “Only workers who were confirmed to have stayed in their Chinese factories for about two weeks are put into workplaces while other workers are blocked due to infection concerns, which put limitations on raising utilization rates,” an LG Electronics official said. LG Display says that it is difficult to find out when they will be able to put workers into their workplaces as the company has not received any guideline about workers who return from Hebei and Zhejiang classified as danger areas.
Some employees in some regions have not yet returned to their factories. An official at a car factory in China said, "Most workers find it hard to get by train tickets to return to their plants. This means that if plants begin to run now, their utilization rates will be below 30 percent." The supply of raw materials and parts is also a big pain in the neck as trucks and freight trains are not operating because logistics itself is in paralysis.