Auto parts supplier Hyundai Metal has filed for bankruptcy, throwing production at leading Korean carmakers into disarray.
Hyundai Metal had applied for rehabilitation, but the judge turned down the request saying it would be more profitable to liquidate the company.
Hyundai Metal had been supplying brake calipers to both Hyundai and affiliate Kia. It achieved W55.8 billion in sales in 2019, but they dropped to W41.3 billion last year and the company suffered an operating loss of W2.5 billion (US$1=W1,177).
The situation only got worse this year. Hyundai Metal chief Suh Hong-kyu said, "I've been running this company for almost 30 years, but there was nothing I could do when the coronavirus pandemic, semiconductor shortage and soaring prices of raw materials all happened at once."
The bankruptcy could lead to a chain reaction of complicating production and damaging other parts manufacturers. Hyundai Metal had been supplying brake calipers for Hyundai's Ioniq 5, the Genesis G80, Kia's EV6, and GM Korea's Spark subcompact and Damas small vans. Altogether 100,000 cars rely on parts from Hyundai Metal.
Moon Seung, the head of an alliance of GM parts suppliers, said, "Brake calipers are usually supplied by one company, so it takes two to three months to find another one." If assembly lines grind to a halt at one carmaker, other parts suppliers could be hit hard as their components will not be paid for until production resumes.
Three parts makers have already turned to a court to authorize rehabilitation, and more could end up suffering next year as automakers shift increasingly to electric cars.
"Electric cars use around 30 percent fewer components than combustion-engine cars, so parts makers will be hit hard," an industry insider said. "We could see a chain of bankruptcies among parts suppliers."
