Supplier’s Labor Woes May Cripple Korean Production

Few would suspect Korea’s major auto makers of putting all of their critical engine parts requirements into one supplier’s basket. But they have, and it could stop vehicle production in that country.

A worker sit-in at a Yoosung Enterprise plant has stopped the flow of piston rings, pistons, cylinder sleeves and other critical parts to all of its customers.

Yoosung supplies about 70% of the piston rings Hyundai uses, as well as other engine parts, on a just-in-time basis.

“We have partial disruption at some of our plants right now,” a Hyundai spokesman tells Ward’s. “We’re not elaborating on what plants are involved or giving specifics.

“However, this will affect us more seriously after May 24, when our engine-parts stocks are finished. We’re looking at getting parts from a smaller supplier.”

Other sources say the supply shortage stopped production over the weekend of the Tucson ix, Santa Fe and Veracruz models.

Yoosung has plants adjacent to Hyundai’s Asan and Ulsan engine facilities, but shipments of piston rings and piston liners were stopped after workers forcibly took control of the plants May 18 in retaliation of a management lock-out following a dispute over wages.

Kia also relies on Yoosung for about 70% of its pistons, rings and cylinder liners. It already has halted production of the Kia Carnival (Sedona) minivan and expects to deplete its stock of piston rings by mid-week, jeopardizing output of virtually all of its vehicles.

Veracruz one of several Hyundai models already affected by parts shortage.

General Motors Korea, which today is launching sales of the Chevrolet Cruze hatchback in Korea, also potentially is in harm’s way.

“Almost all GM Korea vehicles except our minicars (Spark and Matiz) may be affected,” a spokesman tells Ward’s.

Yoosung supplies about half of the piston rings used at GM powertrain plants in Bupyeong and Gunsan that produce engines for GM Korea’s entire portfolio of vehicles.

“We have taken some emergency measures and all manufacturing operations will be able to run normal schedules through this week,” the GM Korea spokesman says. “Beyond that we have no solid plan in place.”

One emergency stopgap will be to use aftermarket parts for production vehicles, and GM Korea is expected to seek additional help through its parent company’s global purchasing network.

“It’s not easy to find another supplier in just one week,” the GM Korea spokesman notes. “Besides, we have a very good relationship with Yoosung and we hope this settles down in a short time.”

Yoosung supplies camshafts for some of Renault Samsung’s popular SM5 models. A spokesman says there is a 3-day inventory on hand, and the auto maker may do emergency sourcing from the Renault-Nissan Alliance network in Japan if needed.

Korea’s smallest auto maker, Ssangyong, uses mostly diesel engines in its vehicles and is not impacted greatly by that supplier’s shutdown. However, its Chairman luxury sedan is dependent on Yoosung for piston rings.

Sales volumes of the Chairman are relatively low, and the Yoosung labor situation may end before Chairman production is affected, a Renault Samsung spokesman says.