Concerns about Chain of Bankruptcies Growing
A secondary partner of Hyundai Motor has declared a withdrawal from business because of the COVID-19 crisis, raising concerns about production disruptions at first-tier partners and Hyundai Motor itself.
Myungbo Industrial, a supplier of crash pads and fuse boxes, sent an official letter to Hyundai Motor Co. and its primary suppliers, including Lear Corp., to inform them of its decision to give up business due to worsening business conditions. If Myungbo industrial stops supplying parts, it will inevitably disrupt production at Hyundai Motor as well as its primary suppliers. Myungbo Industrial’s parts go into the Palisade, the Santa Fe, the Tucson, and the Nexo.
If Hyundai Motor's domestic plant stops this time, it will be the first case of a shutdown due to the bankruptcy of a parts manufacturer. Previously, Hyundai Motor's domestic plants were halted several times due to disruptions in the supply of parts from China, industrial accidents at partners, and reduced demand for vehicles.
Industry insiders are concerned that Myeongbo Industrial's withdrawal may lead to a chain collapse of parts manufacturers. Since April, concern has been expressed about Korean auto parts manufacturers, especially suppliers of relatively hard-hit carmakers such as Renault Samsung, SsangYong Motor and GM Korea. Hyundai Motor's partners have been regarded as less vulnerable – so much so that Myeongbo Industrial’s withdrawal is shocking.
Recognizing the magnitude of the crisis, the government is stepping up its efforts to support the auto industry. It has launched a guarantee program to provide support to small and medium-sized auto parts makers using government funds and contributions. The program will provide 300 billion won in support funds including 10 billion won from the government and 10 billion won from Hyundai Motor.