Hyundai China Shutdown

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Hyundai Motor's factories in China have ground to a halt. The official reason is that the automaker failed to pay its component suppliers. However, analysis shows that the underlying reason for the shutdown could have been something else.

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The operation of Beijing Hyundai Motor's factories was suspended last weekend. All three of the automaker's factories in Beijing and one factory in Changzhou have ground to a halt. This is the first such instance since Hyundai Motor established a presence in China in 1993. On the surface, it appears that the factories were suspended because Beijing Hyundai Motor, a joint South Korea-China corporation, failed to pay its component suppliers on time. As a result, an overseas manufacturer of plastic fuel tanks refused to supply its products to the automaker. A source from Beijing Hyundai Motor said that the payment was delayed because the company's Chinese partner refused to cooperate. This means that the Chinese side, which holds a 50-percent stake in the automaker, refused to cooperate in providing funds. This has led observers to conclude that Hyundai Motor has fallen victim to China's retaliation against South Korea's decision to deploy the THAAD U.S. missile defense system. This comes on the heels of plummeting sales of Korean products stemming from anti-Korean sentiment in China and the weakening technological competitiveness of Korean businesses. Hyundai Motor sold 439,000 cars in China in the first half of the year, just half as many as last year.