Kia Motors delays commercial production at new Chinese plant

Kia Motors Corp., South Korea's second-largest automaker, said Monday it has delayed commercial production at its second plant in China, slated to be started this month, amid sluggish demand in its second-biggest export market. Kia has completed building the US$600 million plant with its two Chinese partners at Yancheong in the eastern province of Jiangsu, but commercial production at the plant is to be delayed for "several months to add some facilities," said Kang Hyun-geun, a company spokesman, by telephone.

"No exact date has been set for commercial production," Kang said. Kia is a unit of Hyundai Motor Co., the nation's top automaker.

Last month, Hyundai cut its sales target for China by 16 percent to 260,000 vehicles, citing weakening demand.

On Sunday, Hyundai Motor Chairman Chung Mong-koo told reporters that Kia has delayed commercial production at the plant until January next year.

Kia's two Chinese partners - Dongfeng Motor Corp. and Jiangsu Yueda Co. - are "strongly opposing" the delay, Chung was quoted as saying by the Seoul Economic Daily.

However, the Kia spokesman denied any friction with the Chinese partners.

"Unconditional facility investment is not the answer. At stake is how much synergy we can create from the investment," Chung told the newspaper.

It is difficult for Hyundai and Kia to "gauge their overseas sales this year" as oil prices have jumped and the Korean currency surged against the U.S. dollar, Chung said.

Last week, Hyundai said it will stop production at its car manufacturing plant in the United States for 10 days during the fourth quarter, hit by a rising inventory and falling sales.

It's the first time that Hyundai has let the U.S. plant idle since it began production in 2005.

Analysts say Hyundai is struggling with tough competition and weak industry demand in the wake of the sub-prime credit crisis in the world's largest automarket.

"Sluggish overseas sales at Hyundai and Kia will continue for the time being," said Hyundai Securities analyst Cho Soo-hong.

Citing the uncertain outlook, the analyst slashed his six-month target price for Hyundai to 85,000 won from 106,000 won. Kia's target price was also downgraded to 13,600 won from 16,000 won.

Hyundai Securities has no relations with Hyundai Motor and Kia Motors.