Fresh China worries hit Hyundai and its suppliers

Shares in Hyundai Motor and its suppliers slid on Friday on fresh worries over their position in China after highly critical state newspaper comments, even as the South Korean automaker managed to get a Chinese car plant restarted.

Hyundai has been at odds with partner BAIC Motor over supplier strategy, sources have said - a rift that appears to be at the root of some of its parts makers not being paid on time, leading to plant stoppages.

Sources have told Reuters that BAIC wants to shift to cheaper Chinese suppliers to cut costs amid intensifying competition in the world's biggest auto market, while Hyundai wants to protect its current supply chain.

The problem has become a major headache for Hyundai which is also grappling with fierce competition and a less than stellar product line-up - a host of difficulties that prompted S&P Global Ratings to cut its outlook for the automaker and affiliate Kia Motors on Friday.

Its China woes were thrust into the spotlight again as the Global Times, in an article in its English edition on Thursday, cited unidentified sources as saying BAIC may end its partnership over supplier disputes.

The state-run newspaper followed up with commentary on Friday lambasting Seoul for its decision to deploy the US anti-missile defence system Thaad - a diplomatic standoff that has been hurting Hyundai and other South Korean firms that are highly reliant on the Chinese market.

Shares in Hyundai suppliers saw some of the worst drops among slides for raft of South Korean firms, as investors feared a shift to Chinese suppliers was underway. Module maker Hyundai Mobis tumbled 4.7 per cent and engine parts maker Hyundai Wia slid 7.1 per cent.

BAIC declined to comment and said it was not aware of the Global Times articles.

Hyundai said in a statement that a cooperative relationship with its partner would continue and "the two companies plan to continue various dialogue to strengthen competitiveness in the Chinese market." The automaker's shares ended down 1.8 per cent and have fallen six per cent since reports of the payment problems in China first emerged.

Source: Khaleej Times