[Editorial] Hyundai Motor Mustn’t Squeeze Parts Providers

The Hyundai-Kia Automotive Group is said to be in negotiations with their primary contractors in order to adjust the price of auto parts. When one considers that the company announced early this year that it was going into emergency mode due to worsening business conditions like the fall in the won-dollar exchange rate, it’s not hard to imagine that the “adjustment” will lead to pressure to lower prices. A lowering of prices by primary contractors will lead to even greater pain for secondary and tertiary contractors.

It’s not that we don’t understand the concerns of management resulting from drastically reduced net profits due to the falling exchange rate or the competition from the falling costs of world auto makers. But even so, to protect its profits by passing the burden on to parts providers is not only unethical, but also throws cold water on the newly emerging pledge by the business to manage itself in a way that promotes coexistence between the finished car manufacturer and parts providers. It's time for companies, rather than squeezing parts providers, to place weight on solving their difficulties by cutting their own costs and boosting productivity along with their parts providers, just like Japanese car companies did when the yen was strong.

Hyundai-Kia must also keep in mind that the people and civic groups are paying unkind attention to its turning over of profits to subsidiaries like Hyundai Mobis and companies like Glovis, whose major shareholder is Hyundai Motor company president Chung Mong-koo’s son Chung Eui-son. Chung Eui-son has been accumulating funds to gain leverage over the automaker based on those turned-over profits. If one talks about sharing the pain, the proper order is to harvest the profits turned over to the subsidiaries and companies under the control of Chung Eui-son.

One might feel that it’s too soon to worry given that the parties are in talks, but the scars of precedent are too deep. Through these talks, the people are watching to see whether the “coexistence between finished car producers and parts providers” that Hyundai-Kia has recently been stressing is no more than talk. It goes without saying that relatively well-paid unions must stand at the head of coexistence.

The Hankyoreh, 16 February 2006.