Halla Climate Control, a top manufacturer of automotive air-conditioning and heating systems, has been dealt a blow as its key client Hyundai Motor seeks new suppliers. In 2011, trade with Hyundai made up 64.1 percent of Halla’s total sales.
According to industry sources on Wednesday, Hyundai has recently stopped buying climate control products from Halla for the Sonata model produced at its Alabama plant and instead named Japanese auto parts maker Denso as the new supplier.
The Korean auto giant also changed the supplier for its Chinese production to Doowon Climate Control, a Korean parts supplier whose market share stands at 25 percent next to the No. 1 Halla’s 54 percent in terms of 2011 orders.
“Korean carmakers and their large suppliers sometimes have troubles. But changing a supplier is a rare case,” said an industry source who wished to remain anonymous.
“Considering the climate control system is one of the most competitive areas among global carmakers for their environment-friendly, fuel-efficient cars and the cooperation between carmakers and suppliers is essential, Hyundai Motor and its affiliate Kia Motors are likely to further reduce orders from Halla gradually,” he said.
A Hyundai Motor official said, “The partnership with Halla was not going smoothly when it came to the models produced in the U.S. and China.” He declined to further elaborate on the issue.
As of the third quarter of 2011, Halla’s orders from Hyundai Motor and its parts affiliate Hyundai Mobis reached about 1.6 trillion won ($1.5 billion), or 59.9 percent of its total sales.
When including component contracts with Kia Motors, Halla’s sales dependence on Hyundai Motor Group amounted to 64.1 percent in 2011. For Doowon, the No. 2 player in Korea, trade volume with Hyundai made up 67 percent of its total 2011 sales.
In the first three quarters of 2012, the company logged 2.6 trillion won in sales and 236.6 billion won in operating profits.
Possible changes in relationship with Hyundai, the source said, are also expected to affect negatively Halla’s pending acquisition of the climate control business from Visteon, aU.S.-based automotive supplier and its largest shareholder with 70 percent shares.
Industry watchers have said that the potential acquisition is aimed at elevating Halla Climate Control’s market value before Visteon sells off the company to its former owner Halla Group at higher prices.
Halla Group, whose chairman is Chung Mong-won, a cousin of Hyundai Motor Group chairman Chung Mong-koo, is said to be considering acquiring back Halla Climate Control, which had to have been sold off during the 1997-98 financial crisis.
By Lee Ji-yoon (
jylee@heraldcorp.com)
