Global Value Chain in Paralysis
Until March, Korean companies were concerned about production disruptions due to the spread of the novel coronavirus in China. As the virus has spread around the world, they are now faced with disruptions in global demand and supply. The global value chain has been paralyzed, impacting on major Korean industries such as automobiles, electronics, and steel.
Korean companies are halting overseas plants one after another to prevent the spread of COVID-19. In the case of Hyundai Motor Group, its factories in Korea continue to roll out cars, but among its 12 global production bases, all factories except those in China have stopped or are expected to stop their operations. Hyundai Motor Co.'s factories in the United States, the Czech Republic, Russia, Brazil, Turkey and India are all closed down.
Kia Motors has halted the operations of its plants in the United States, Slovakia, and India and its plant in Mexico has decided not to run for a week starting April 6, so four of its five plants are not in operation. Kia Motors’ Mexican plant has decided to stop operating for six to eight days in consideration of reduced automobile demand and employee safety triggered by the spread of COVID-19. Hyundai's Alabama plant in the United States, the first to be placed on a lockdown among Hyundai’s global bases, closed down on March 18 as an employee tested positive for COVID-19 and will stop its operation until April 10.
Kia Motors’ Georgia plant, which receives engines from the Alabama plant, was also shut down for about 20 days due to the suspension of the Alabama plant, but the plant will be stopped again from March 30 to April 10.
Plant shutdowns in Europe are also continuing. Hyundai's Czech plant will cease production from March 23 to April 13 and Kia's Slovakian plant will stop from March 23 to April 3.
Hyundai's Turkish plant will also be shut down from March 27 to April 12. The plant moved up a planned shutdown (April 1 to 12) to prepare for production of a new model (i20). In addition, Hyundai's Chennai plant and Kia's Andhra Pradesh plant in India will be shuttered from the March 23 to April 14 in accordance with the Indian government's policy to stop plant operations.
The electronics industry is concerned about production disruptions in North America, South America, Europe, and India. Samsung Electronics will shut down its plants in Noina and Chennai, India from March 23 to April 14 in compliance with the state government policies. They produce smartphones and home appliances, respectively.
In Brazil, two production plants of Samsung Electronics have been closed down. The Campinas factory, which produces smartphones, will be shut down for two weeks from March 30 and the Manaus factory which produces smartphones and TVs has also extended its shutdown period to April 12.
In Europe, Samsung Electronics’ Polish plant will be shut down from April 6 to 19. Its Hungary and Slovakian plants were shut down until April 1, and its plant in Russia has been shut down.
LG Electronics also put a halt to the operation of six of its 41 production bases. Its home appliances factory in Noida and TV Factory in Pune of India will be closed down from March 25to April 14th.
In the United States, LG Electronics’ washing machine plant in Tennessee has been shut down since March 30th and its Detroit auto parts factory since March 20. Its plants in Manaus, Brazil, and Ruza, Russia, have also been shut down since the end of in March.
In addition, LG Electronics’ battery cell plant and Samsung SDI's battery pack plant in Michigan in the United States have been suspended since March 25 as Michigan State issued a “stay-home” order for three weeks.
The situation goes similar in the steel industry, too. POSCO's processing centers in Italy, India, the Philippines, and Malaysia stopped one after another. Of Hyundai Steel’s nine countries' processing centers, those in countries except China stopped operating partially or entirely. Deteriorating profitability forced the steelmaker to decide to cut production at a hot-rolling mill with electric furnaces in Dangjin, Korea.