(News Focus) S. Korean automakers drive into difficulties

SEOUL, Dec. 1 (Yonhap) -- Pounded by a deepening economic slump at home and
overseas, South Korean automakers are slashing daily overtime, suspending weekend
production or idling plants to cope with slumping sales, according to the
carmakers and analysts on Monday.
The near-term outlook for Hyundai Motor Co. and other local automakers is bleak
as uncertainty lingers about how deep and how wide the global economic downturn
will be.
With fears of a global recession rapidly spreading over South Korea, consumers
here began shunning big-ticket spending in the face of falling asset prices and
stricter credit.
Adding to the woes, car exports are losing steam at a faster pace, taking a heavy
toll on South Korean automakers, which have long relied on overseas markets to
fuel growth amid a flattening home market.
Monday's data released by the nation's five automakers, including Kia Motors
Corp., GM Daewoo Auto & Technology Co., Renault Samsung Motors Corp. and
Ssangyong Motor Co., showed their combined vehicle sales in November fell 12.1
percent from a month earlier to 445,111 units.
Domestic sales plunged 29.3 percent from a month ago to 74,217 units last month,
while exports declined 7.5 percent to 401,144 units.
"It's worrisome as sluggish demand is spreading from advanced economies to
emerging markets," said Kim Yoo-mi, an economist at Eugene Investment and
Securities.
Falling domestic and overseas demand has forced South Korea's top three
automakers to cut production.
Hyundai, the nation's top automaker, started cutting daily overtime for employees
at its seven domestic plants on Monday, marking the first such move since 1998,
when South Korea's economy was teetering on the edge of collapse in the face of
the Asian financial crisis.
The decision to cut daily overtime hours at Hyundai is likely to reduce the
automaker's combined monthly output by 10 percent, or some 150,000 vehicles, a
company official said.
Hyundai's affiliate Kia Motors is following suit. Kia has already cut overtime
work and weekend shifts at six local plants, producing some 50,000 fewer vehicles
per month.
The local unit of troubled U.S. auto giant General Motors Corp. has been hit the
hardest.
GM Daewoo Auto & Technology on Monday suspended one of two production lines at
its main plant until Jan. 4 next year amid slumping sales.
The move is the first time that GM Daewoo suspended production since it's
creation in 2002, when GM and its partners acquired Daewoo Motor Co., the
automobile subsidiary of Daewoo Group, which collapsed under huge debts in the
wake of the 1997 Asian financial crisis.
The No. 1 plant in Bupyeong and other remaining plants in South Korea will be
closed for two weeks starting Dec. 22, GM Daewoo said.
An official at GM Daewoo said that if "sales aren't improved," the company would
extend the suspension to the end of March next year.
Some analysts say GM Daewoo may lose its viability if the Detroit-based GM goes
bankrupt.
Meanwhile, Ssangyong Motor, controlled by China's Shanghai Automotive Industry
Corp., is considering shutting down its sole plant for two weeks in December. So
far, Ssangyong has cut about 450 jobs to cut costs, according to the company's
union.
Renault Samsung, owned by French automaker Renault SA, is cutting jobs through a
voluntary retirement program.
And the worst may be yet to come, as an industry group predicted domestic vehicle
sales would fall 14 percent next year.
Auto sales in South Korea are forecast to total 1.1 million units in 2009,
compared with a projection of 1.25 million units this year, the Korea Automobile
Manufacturers Association said last week.
"Sales are falling at a faster pace as consumers are increasingly unable to get
auto loans these days," said Koo Hee-cheol, an official at the association.
It would be the first annual decline since 2004, when car sales stood at 1.09
million vehicles, Koo said.
(END)