Renault Samsung halts Korean plant operations over chip shortage

Renault Samsung Motors Corp. announced on Monday, July 19, that it would be suspending its plant operations in South Korea. The halt is temporary, and the company will resume production once it has enough parts to use for the vehicles.

Series of plant closures at Renault Samsung

According to The Korea Herald, the Korean unit of Renault S.A. is likely to suspend the production in its plant in Busan from Monday to Tuesday of this week. Apparently, the chips shortage is still affecting the auto business worldwide.

This production halt is the second since May when Renault Samsung had to close the plant due to strikes staged by the union. The workers are asking for a pay increase for 2020, but up to now, the two sides have yet to come up with a deal.

The company is said to be restructuring so it can survive. The demand for its vehicle models is lower than anticipated, plus the pandemic also affected its overall sales.

To cope and stay afloat in the business, Samsung Renault is also offering voluntary retirement for all employees, and it will also reduce the number of its executives by 40%. The executives who will remain will have their pay cut by 20%. Thus, it can’t be predicted how much wage increase it could grant the workers.

The suspension at the Busan plant this week

At any rate, the Renault Samsung Motors factory in Busan will be closed for two days starting today. As mentioned on Yonhap News Agency, while this is the second closure since May, this is the first time that it is suspending production due to chips shortage.

Its rivals in South Korea, such as Kia Corp., Hyundai Motor Corp., and General Motors Korea, have all suspended operations at certain times this year, but this is the first for Renault Samsung. But all of these automakers have one thing in common, all of them have experienced a decrease in sales since the chip shortages stopped them from producing more units.

"The production suspension was attributable to the fallout of prolonged global chip shortages," one of the company officials explained. Meanwhile, the Busan plant is mainly producing all the Renault Samsung’s XM3 SUV units that are being sold around the world except in Russia.