Auto industry asking for emergency loans

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Auto industry asking for emergency loans

The local automobile industry asked the government to provide 32 trillion won ($26 billion) in emergency loans to save automakers and associated companies struggling from the impact of the coronavirus pandemic.

Senior officials from five local automakers and nine auto parts manufacturers met Tuesday with the Ministry of Trade, Industry and Energy. Auto industry officials said they need a total of 42 trillion won to maintain their work forces, operate facilities and keep up with fixed costs for the next three months, according to the Korea Automobile Manufacturers Association.

The officials said they can afford 10 trillion won out of their own pockets but need 32 trillion won from the government and financial institutions. Automakers also requested tax cuts to overcome the pandemic’s negative impacts on sales and production.

The five domestic automakers account for 150,000 jobs in Korea, the ministry said. They generated 97 trillion won in sales last year.

Their roughly 8,850 partner companies generated 100 trillion won in revenue while employing 240,000 workers.

Aggregate sales for Hyundai Motor, Kia Motors, GM Korea, Renault Samsung Motors and SsangYong Motor in March fell 14.9 percent to 597,826 vehicles. The coronavirus outbreak dealt a major blow to export volumes for the five domestic automakers.

In February, aggregate sales for the Korean companies dropped 11 percent on year to 505,212 units. In the first month of the year, the five carmakers sold a combined 553,558 vehicles, down 6 percent from January 2019.

The Industry Ministry said the same trend is expected this month as sales in Europe and North America, which together account for 63.1 percent of total sales for Korean cars, have declined as dealerships halt operations.

The problem would be greater for Hyundai Motor and Kia Motors, as many of their overseas factories have had to close doors for days and have been running at low operating rates.

The automakers’ vehicle production schedules were also disrupted from countries implementing social distancing campaigns and measures halting business, along with companies’ employees contracting Covid-19.

In response to difficult market conditions, domestic automakers have been introducing discount plans and installment payment options to boost sales.

They have been also reducing the operating rates of their factories to meet the lower demand.

The ministry responded in the meeting that the government will provide special loans totaling 21.2 trillion won and inject an additional 8.4 trillion won for auto parts suppliers and automakers to stay in business.

It additionally demanded automakers work together with their labor unions to overcome the crisis and maintain their employment numbers.

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