South Korea's two largest automakers say they are implementing "emergency management" amid a sharp slowdown in the global economy. The outlook for South Korea's auto industry is sobering.
Hyundai Motors and its affiliate, Kia, have slashed the number of cars they were aiming to sell this year by more than 12 percent as part of their strategy to weather the global recession. The companies say they have also frozen salaries for managers.
They are not the only South Korean car makers putting on the brakes. The South Korean unit of French automaker Renault SA says it will shut down its only South Korean plant until next year. GM Daewoo has halted production at a plant in South Korea's second largest city, Pusan, until January 4. Auto companies across the board say they plan to cut factory working hours in the future.
Workers informed they will not be paid this week
South Korea's Ssangyong Motors, owned by a Chinese company, is having trouble making its payroll due to lagging sales. Choi Ki-min is a policy director at the Ssangyong labor union.
He says managers informed the workers without any discussion that they would not be able to pay salaries due this week. The workers say they will consider strikes and protest action if the wages are not paid soon.
South Korea's auto industry troubles mirror the economic crisis in the United States, where the collapse of several financial institutions under a mountain of bad debt pulled the keystone on a global recession. U.S. President George Bush announced an emergency loan for two of the top three U.S. auto makers last week, but their future after three months remains unclear.
Will S. Korean auto bailout be needed?
Last week, the Korea Automobile Manufacturers Association predicted South Korean auto exports would drop by more than 5.5 percent next year. Domestic car sales are forecast to drop nearly 9 percent, to the lowest point since South Korea suffered its own financial crisis 11 years ago.
South Korean President Lee Myung-bak toured the GM Daewoo plant last week, calling on the industry to change its economic fundamentals.
South Korea's government has slashed an auto consumption tax by a third in hopes of spurring domestic demand for cars. Officials are now considering whether South Korean car makers will require an infusion of public cash, similar to the bailout plan that was considered in Washington.