Supplier Strike Threatens Production of Hyundai, Kia Models

May 24, 2011

The biggest manufacturing lesson learned from this spring’s disaster in Japan is quite possibly this: single-source suppliers carry a large inherent risk. Hyundai and Kia are learning that lesson right now, as a labor strike at Yoosung Enterprise Company has crippled production of Hyundai’s Tucson, Veracruz and Santa Fe models built in their Ulsan, Korea, plant. The strike has also stopped production of Kia’s Carnival minivan at their Shari, Korea, plant. Yoosung supplies up to 70 percent of the piston rings used in Hyundai and Kia products, and also supplies components to the Korean businesses of General Motors and Renault SA.

At issue is a disagreement on wages and shift scheduling among Yoosung employees.  Production at their manufacturing facility was stopped on May 18, when labor members occupied production lines. The conflict has yet to be resolved, leaving automakers scrambling to find a new component supplier. Hyundai estimates that their supply of engines for the above Korean-built vehicles will start to be depleted as of Tuesday, May 24.

It’s not yet clear what the impact to Hyundai’s US sales will be, or if the same supplier provides components for engines and vehicles built in the United States. Hyundai assembles the Sonata and Elantra sedans at their Montgomery, Ala., plant, while Kia builds the Sorento crossover and the Hyundai Santa Fe at their plant in West Point, Ga. Through April, U.S.-built models accounted for roughly 77 percent of Hyundai’s U.S. sales.

[Automotive News]

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