It’s Just Business, Hyundai
Shelly Banjo is a Bloomberg Gadfly columnist covering industrial companies and conglomerates. She previously was a reporter at Quartz and the Wall Street Journal.
Hyundai Motor Co.'s week-long shutdown at its China plants may have had more to do with business brains than political brawn.
The South Korean carmaker said Wednesday that it resumed operations at its venture with state-owned BAIC Motor Corp., after an interruption prompted by its failure to pay a local supplier. Beijing Hyundai had to suspend production at four of five factories when a fuel-tank vendor refused to provide the parts.
That two giant car companies with $32 billion of cash inbetween them couldn't afford to keep production going at a longtime partnership was always absurd. After all, when ventures fight, parent companies typically join coerces to inject cash and keep operations afloat.
It was natural, then, to see the halt as reflecting the widening ramifications from a dispute over South Korea's hosting of a U.S. missile defense system, which incensed Beijing and inspired a government-backed consumer boycott that's caused Hyundai's sales in China to plunge.
Could the plant suspension have meant the Chinese government was using BAIC to further express its anger with South Korea? Or could Hyundai have engineered the shutdown to send its own message: that penalizing the Korean company would also exert a toll on one of China's largest automakers?
This time around, the story may have more to do with business than politics.
Hyundai 2Q China sales
It's true that Beijing Hyundai's takings have nosedived: Hyundai's China sales fell sixty two percent in the 2nd quarter from the year before, while BAIC booked a one hundred thirty two million yuan ($20 million) loss in the six months ended in June, mostly attributed to the shortfall at the venture.
But South Korean carmakers were already losing market share well before the boycott began. And now, the entire Chinese car market is slowing after a period when sales enhanced at crazy double-digit highs.
So it's reasonable to expect Hyundai and BAIC to shutter production on a rolling basis and tell suppliers it wants to cut back on certain parts in order to keep inventory under control. 
The same thing happened in two thousand twelve when a territorial dispute inbetween Tokyo and Beijing sparked anti-Japan protests and throttled sales of Toyota Motor Corp. and Honda Motor Co. Back then, the companies determined to close factories and adjust production as Japanese car sales in China took about a year to recover. 
Shares in Hyundai pared losses after falling as much as Three.8 percent Wednesday, while BAIC slumped as much as Four.Two percent in Hong Kong, underscoring the potential harm to the Chinese playmate.
While a production halt is bad news in the brief term because it signals the companies expect the sales slump to persist, the silver lining is that the venture isn't burying its head in the sand.
By managing production and keeping a close eye on inventory, Beijing Hyundai will be better placed to rebound once request recovers.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
To contact the author of this story:
Shelly Banjo in Hong Kong at [email protected]
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