Halla Climate Falls as Hyundai Switches Supplier

Halla Climate Control Corp. (018880) fell the most in almost five months in Seoul trading after Hyundai Motor Co. (005380) chose Japan’s Denso Corp. (6902) to supply air-control equipment.

Halla Climate, a maker of car air-control systems and components, slumped 11.4 percent to 21,400 won at the close in Seoul, its biggest drop since Aug. 7. South Korea’s benchmark Kospi index declined 0.6 percent.

Hyundai Motor will use Denso’s air-control parts for U.S.- made Sonata sedans, the auto company, South Korea’s biggest carmaker, said in an e-mailed response to a Bloomberg News query today. The Seoul-based company and affiliates Kia Motors Corp. (000270) and Hyundai Mobis (012330) Co. together account for 70 percent of Halla’s revenue, according to data compiled by Bloomberg.

“Hyundai is probably trying to lower its dependency on Halla, which has long been Hyundai’s key air-control parts supplier,” Kim Yoon Ki, an analyst at Mirae Asset Securities Co. in Seoul, said by phone. “It’s the right strategy for Hyundai, as it’s rare and dangerous for an automaker to be that dependent on one supplier.”

Kim has a buy rating for Halla and Hyundai Motor.

The switch is part of the company’s regular supplier diversification to ensure a stable delivery of parts, Hyundai Motor said in its e-mail.

The Korea Economic Daily reported the supplier switch earlier today.

Denso last traded 0.8 percent higher to close at 2,973 yen in Tokyo on Dec. 28. Japanese markets resume trading tomorrow.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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