Hyundai suspends China plant for a week amid diplomatic stand-off

Mon Mar 27, 2017 3:24am EDT
 
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By Hyunjoo Jin

SEOUL (Reuters) - South Korea's Hyundai Motor (005380.KS: Quote) on Monday said it had suspended production at one of its Chinese factories for a week, fuelling concern that a diplomatic standoff may be hurting sales in the automaker's top market.

South Korean companies, from cosmetics firms to retailers, say they are being targeted in China because of Beijing's objections to a planned deployment of the U.S. Terminal High Altitude Area Defence (THAAD) system in South Korea. China worries the system's powerful radar can penetrate its territory.

News of Hyundai's China plant closure, first reported by online media ChosunBiz on Sunday, drove shares of the company down as much as 3 percent on Monday. The shares recovered slightly to end down 1.2 percent.

Shares in Hyundai's affiliates, Kia Motors (000270.KS: Quote) and Hyundai Mobis (012330.KS: Quote), also finished lower.

Hyundai said it had suspended the plant in Hebei Province, from March 24 to April 1, in order to check its production line to modify technology. The automaker has three other passenger car factories in China - a country that accounts for about a quarter of its total sales. No further details were available.

Industry officials and analysts say the suspension may be aimed at bringing down inventories given slowing sales in China, due to political tension and rising competition.

Ko Tae-bong, an analyst at Hi Investment & Securities, said Hyundai's March sales in China may have fallen year-on-year due to the political spat, after gaining in January and February.

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An employee sits in front of the logo of Hyundai Motor Co. at its dealership in Seoul, South Korea, October 22, 2015. REUTERS/Kim Hong-Ji