Auto Parts Manufacturers on the Brink of Going Under

The Korea Auto Industries Cooperative Association announced on Sept. 24 that 84 listed auto parts manufacturers posted a combined operating loss of 84.5 billion won in the first half of this year whereas their operating profit exceeded 700 billion won in the first half of last year. Their operating profit ratio dropped from 2.5 percent to negative 0.3 percent and the number of those in the red more than doubled from 21 to 49 during the same period.

This is because the impact of COVID-19 on automakers that started in the second quarter of this year spread to those companies working with the automakers. Besides, the auto parts manufacturers’ difficulties are increasing as they are maintaining their employment amid a plunge in profits.

Especially, those working with GM Korea, Renault Samsung and SsangYong are in a dire situation with the three carmakers’ stagnation ongoing. For the first eight months of this year, their exports dropped 27 percent, 73 percent and 34 percent from a year ago, respectively. The declines in exports led to a rapid decline in capacity utilization on the partners’ part. Potential strikes in the carmakers are another risk factor for the auto parts manufacturers.