Hyundai, Kia production disrupted due to strike at supplier

Hyundai, the world's fifth biggest carmaker along with Kia Motors , warned that a protracted supply disruption could deal a blow at a time when Japanese rivals are all-out to resume production after the March 11 earthquake.

The parts supplier, Yoosung Enterprise Co, Ltd, stopped production from May 18, after labor members occupied production lines over disagreements on new wage and shift systems, Hyundai said in a statement. Yoosung provides key engine parts to Hyundai, Kia, the Korean units of General Motors, Renault SA and Ssangyong Motor .

Around 70 percent of the piston rings used in popular models produced by the two firms such as Sonata sedan, Santa Fe SUV, the K5 sedan and Sportage R SUVs come from the supplier.

The supply woe crippled the production of Hyundai's SUVs such as Tucson ix, Santa Fe and Veracruz at an Ulsan plant from Sunday and the production of Kia's Carnival SUV at the automaker's Sohari plant from Friday.

"Our engine inventory will start to dry up on May 24, after which a production disruption will be inevitable for all of our passenger and commercial vehicles except for some small models," Hyundai said in a statement.

The Korean units of General Motors and Renault said that their production could be affected should the sit-in strike remain unresolved, although there is no immediate impact on output.

"Yoosung's piston rings account for around 50 percent of the parts used in our engines. There will be no major impact on production this week. But we are closely monitoring the situation," a GM Korea spokesperson said.

"Yoosung supplies all of the camshafts used in our SM5 2.0 models. We have an inventory of four days, but a prolonged strike could affect our production," a spokesperson for Renault Samsung Motors said.

A Ssangyong Motor spokesperson was not immediately available for comments.

Copyright Reuters, 2011