Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal
Investment Environment
+
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
■ Korea’s Auto Industry - Today
■ Korea’s Auto Industry - Tomorrow
■ Korean Auto Manufacturers
Seoul, KOREA 300-9, Yomgok-dong, Seocho-gu, Seoul, Korea
Tel: 82-2) 3460-7615 Fax: 82-2) 3460-7943 www.investkorea.org
■ Korean Auto Parts Industry & Manufacturers
■ Auto Parts Manufacturers by core component
■ Multinational Auto Parts Manufacturers in Korea
■ Background to Investment by Multinational Auto
Parts Manufacturers in Korea
■ Operation of Auto Part Business in Korea
■ The Features of Major Industrial Complexes and
Detailed Infrastructures
■ Korea’s Economic Trends, Labor and Labor Unions
Table of Contents
Korea’s Auto Industry-Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment
Environment
02
04
07
13
17
23
27
Korea’s Auto Industry - Today
Korea’s Auto Industry - Tomorrow
Korean Auto Manufacturers
Korean Auto Parts Industry & Manufacturers
Auto Parts Manufacturers by core component
Multinational Auto Parts Manufacturers in Korea
Background to Investment by Multinational Auto Parts
Manufacturers in Korea
31
34
Operation of Auto Part Business in Korea
41
Korea’s Economic Trends, Labor and Labor Unions
The Features of Major Industrial Complexes and
Detailed Infrastructures
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
1. Korea’s Auto Industry - Today
The year 2005 marks the 50th year since Korea first began manufacturing automobiles. From
the time when Korea started with a simple KD assembly process in the 1960s it has grown to
be the only nation, among those that started developing an auto industry after World War II,
which is capable of manufacturing cars with its independently-developed technologies, thereby
becoming the world’s sixth-largest automaker today.
Korea’s auto industry in global perspective. As of the end of 2004, the number of cars
manufactured in Korea reached 3.47 million, of which exports amounted to 2.38 million units,
making Korea the world’s 6th-largest manufacturer (5.4%), after the United States, Japan,
Germany, China and France. In terms of domestic consumption it ranked 10th in the world by
consuming 1.1 million units in 2004
2003
Nation
2004
Portion
Portion
%
(‘04/’03)
1
USA
12,087
19.7
11,956
18.5
-1.1
2
Japan
10,286
16.8
10,512
16.3
2.2
3
Germany
5,507
9.0
5,565
8.6
1.1
4
China
4,444
7.2
5,071
7.8
14.1
5
France
3,620
5.9
3,700
5.7
2.2
6
Korea
3,178
5.2
3,469
5.4
9.2
7
Spain
3,030
4.9
3,011
4.7
-0.6
8
Canada
2,553
4.2
2,711
4.2
6.2
9
Brazil
1,827
3.0
2,206
3.4
20.7
10
UK
1,846
3.0
1,856
2.9
0.5
Worldwide
61,319
100
64,616
100
5.4
Source: Korea Automobile Manufacturers Association (KAMA)
When it comes to manufacturing scale, Korea-situated in the hub of Northeast Asia with China
and Japan-has been playing a leading role, together with emerging China, in the region. The
combined manufacturing capacity of these three countries ranked world’s first in terms of
manufacturing output and third in terms of the scale of domestic consumption in the world,
when compared by regional unit.
Korea’s Auto Industry - Today and Tomorrow
No
(1,000units, %)
02 I 0 3
Big 10 Automotive manufacturing nation in 2004
Auto manufacturing and sales performance of Asia’s “Big 3” in 2004
Country
Manufacturing output
(1,000 units)
Domestic Demand
(1,000 units)
Northeast Asia (3 nations)
19,052
12,019
Korea
3,469
1,095
China
5,017
5,017
Japan
10,512
5,853
Western Europe
14,132
7,911
North America
14,667 (USA 11,956)
18,875 (USA 17,301)
Korean Auto Industry in the world. The auto industry is regarded as a general and key industry,
having significant ripple effects on other industries, thus stimulating the growth of related
industries with brisk manufacturing on the back of fast-growing exports. Of Korea’s total trade
surplus, amounting to US$30 billion, the auto industry including auto parts results in 2004
accounted for 90%, or US$27.6 billion, paving the way for it to become the nation’s core
industry. Exports of automobile increased 39.6% year-on-year to US$26.7 billion, which
accounted for 12.8% of the nation’s total exports, setting a new record.
Big-10 Export products in 2004
No
Product
2001
2002
%
1
2
3
4
5
6
7
8
9
10
Auto
Assembled
Parts
Semiconductor
Mobile phone
Computer
Ship
Petroleum
products
Plastics
Steel plate
Video products
(in US$ mil.,%)
2003
%
2004
%
%
15.545
13.322
2.223
14.259
9.854
11.245
9.909
7.794
1.3
0.8
4.7
-45.2
25.0
-23.4
17.7
-13.9
17.483
14.779
2.705
16.631
13.619
12.941
10.867
6.382
12.5
10.9
21.7
16.6
38.2
15.1
9.7
-18.1
23.346
19.119
4.227
19.535
18.697
14.977
11.334
6.623
33.5
29.4
56.3
17.5
37.3
15.7
4.3
3.8
32.598
26.668
5.930
26.450
26.390
17.180
15.090
9.802
4.524
4.087
3.519
3.924
150.439
-10.3
-15.6
-4.1
-15.6
-12.7
4.955
4.024
4.052
3.644
162.471
9.5
-1.3
15.2
-7.1
8.0
6.260
5.841
5.618
3.350
193.817
26.3
45.1
38.7
-8.1
19.3
8.514
8.498
7.753
3.162
254.221
Source: Ministry of Commerce, Industry and Energy(MOCIE)
39.6
39.5
40.3
35.4
41.1
14.7
33.1
48.0
12.8
10.5
2.3
10.4
10.4
6.8
5.9
3.9
3.3
36.0
3.3
45.5
3.0
38.0
1.2
-5.6
31.2 100.0
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Automobiles have been Korea’s largest export product since 2001, followed by
semiconductors, mobile phones (US$26.4 billion), computers (US$17.2 billion) and
shipbuilding (US$15.1 billion).
Along with automobiles posting a record high, auto parts also marked US$5.9 billion in 2004,
up 40.4% from a year earlier, in tandem with the rising trend of Korea’s brisk car exports.
Current performance of Korea’s auto industry and outlook
2002
2003
%
2004
%
(%)
2005(Outlook)
%
%
Production
(1,000 Units)
3,148
6.8
3,178
1.0
3,469
9.2
3,600
3.7
Domestic
(1,000 Units)
1,622
11.8
1,318
-18.7
1,095
-16.9
1,150
5.1
Exports
(1,000 units)
1,509
0.6
1,815
20.2
2,380
31.1
2,450
3.0
Export
(US$ mil)
14,780
10.9
16,561
17.7
26,668
37.9
-
-
Source: MOCIE, National Auto Association
Despite sluggish domestic demand in 2004, Korea’s auto industry marked a record high in
manufacturing thanks to booming exports. In 2005, domestic sales and exports are expected to
rise slightly to exceed 3.6 million units, exceeding the record achieved in 2004.
04 I 05
Korea’s auto industry aims at becoming an advanced auto manufacturer in the global market as
a long-term vision.
Korea plans to secure the 21st century’s state-of-the-art technologies to develop next-generation
automobiles that will serve as a growth engine for the future, thereby advancing to become the
world’s fourth-largest automaker by 2012. And when it comes to the auto parts industry, Korea
aims to upgrade the existing auto parts industry cluster into a high value-added cluster,
transforming the traditional casting, molding and injection-type industry, dubbed the 3-D
industry, into a sophisticated, advanced and environment-friendly industry. And in an effort to
Korea’s Auto Industry - Today and Tomorrow
2. Korea’s Auto Industry - Tomorrow
comprehensively improve the Korean auto industry, it plans to develop the next-generation auto
technologies and accelerate globalization in collaboration with academic, industrial circles and
the government so as to further sharpen Korea’s international competitiveness to become the
world fourth-largest auto manufacturer in 2012.
When Korea emerges as a member of the elite club of advanced automakers in the global
market, at least one local auto manufacturer will grow to become a member of the Big-5 global
brands, and a member of the world’s top 100 auto parts manufacturers, which currently
includes just a single local manufacturer, is expected to increase to up to 10. Moreover, the total
number of automobiles manufactured will surpass the 4.3 million-level with a global market
share reaching 10%, and the average export price per unit is forecast to jump to US$16,000
from a current US$8,186 on the back of upgraded valuation. The domestic industry’s
dependence on the auto industry is expected to increase up to 12.2% in 2008, from 10.7% in
2001, to outpace the semiconductor industry.
Contribution to the industry (2008)
(%)
Textile
Steel
Semiconductor
Auto
Manufacturing
10.0
5.6
11.2
12.2
Exports
10.2
2.6
17.5
6.6
Global market
share
4.4
6.0
18.5
6.6
Source: Korea Institute for Industrial Economics and Trade (KIET)
Vision of Korean auto industry
2002
2007
2012
Production (KRW trillion)
62
76
87
Value added
29
39
55
Exports (US$100 mil)
194
224
410
Global market share(%)
5.5
8.1
9.8
Employment
20
23
27
Overseas production
20
100
205
Note: based on assembled cars
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Vision of Korean Auto-Industry
2003
World's top
largest Auto part
Manufacturer
5.4% (World’s No.6)
US$ 18.9 billion
3.18 million units
US$ 4.2 billion
1 Company
(Mando)
10.0 % (World’s No. 4)
US$ 31.5 billion
4.5 million units
US$ 6 billion
10 Companies
Development of next-generation automobile and plan Korea aims at developing core
component technology for next-generation cars, and in technical cooperation with large
component manufacturers armed with independent parts development technologies, it has been
pushing for building globalized bases in line with global sourcing trends. The trend of global
auto industry technologies in 2010 is forecasted to be modularized toward high-safety and
environment-friendly automobiles with telematics becoming increasingly popular, coupled with
the components electrified up to 40% level. The market share of hybrid cars is expected to soar
to around 10%, with a fuel battery-powered car to be commercialized by 2020. In line with
such long-term trends, the local auto industry will internally focus on developing environmentfriendly diesel engine in the short-term, and considering that the hybrid is the intermediate
stage ahead of a battery-powered car, it will concentrate the efforts on developing the hybrid
car, combining fuel battery-powered technology with a small-sized environment-friendly diesel
engine in the mid- to long-term. And as a long-term strategy, it will be drawing up a blueprint
focusing on development and commercialization of fuel batteries.
As part of these efforts, Korea has already launched a 10-year industry-academic joint project,
dubbed the “Future Automobile Development Project”, from 2002 thru 2011, earmarking a
budget totaling KRW1.25 trillion in an attempt to eventually develop an extremely-low
pollution-generating (equivalent to 100km/21 level) intelligent car that will integrate the hybrid
engine and fuel battery technology with high-efficiency energy, environment-friendly and stateof-the-art technologies.
Korea’s Auto Industry - Today and Tomorrow
100th
2012
06 I 0 7
Global Market Share
Automobile Exports
Automobile Outputs
Auto parts Exports
Goals of the Future Car Development Project
Sector
Energy
Final target technologies
Technology securing CO2 exhaust 70g/km
-High efficiency engine, Light-weight, Fuel battery
Core technologies of extremely low pollution-generated
Environment
mid & small-sized car (Euro-V requirements)
- Catalyst, recycle, alternative fuel engine technologies
ASV (Advanced Safety Vehicle) / Telematics-related
Advanced technology
system technology
-Sophisticated electronics parts, Simulation design
system technology
Development of 100km/2l-level pilot car
Joint tasks
-Development of basic technology integrating the
energy, environment and advanced system.
3. Korean Auto Manufacturers
Korean auto manufacturers, as of 2005, comprise Hyundai Motor Company, Kia Motors Corp,
GM Daewoo Auto & Technology, SsangYong Motor Company and Renault Samsung Motors.
Hyundai Kia Motors
The nation’s largest auto manufacturer, with employees numbering 80,000 and total assets
valued at KRW21 trillion, has grown to become a world-renowned automaker.
Its domestic production reached more than 3 million annually, and its long-term strategy is to
establish facilities abroad with manufacturing capacity in excess of 2 million units.
Manufacturing facility of Hyundai-Kia Motors
Hyundai s Ulsan factory is the world’s largest single auto-making factory, with five
independent production lines covering a 5 million m area, manufacturing 1.6 million cars
annually. It is the nation’s largest car production base, representing the Korean auto industry.
Hyundai s Asan factory This state-of-the-art factory focuses on strategic export market cars
built in an area covering 1,815,000m , with a total floor area of 660,000m pyeong to
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
accommodate the press, body, painting, assembly, engine lines and material production
facilities, which are capable of manufacturing 300,000 units annually. It is a completely
independent facility designed to manufacture only passenger cars.
Hyundai s Jeonju factory is one of the world’s largest commercial vehicle manufacturing
facilities built on a 990,000m site, with a floor area of 330,000m , and it is capable of
producing 100,000 units annually.
Kia Motors Corp operates its factories in Hwasung, Sohari in Gyeonggi Province and
GwangJu in JeonNam Province of which annual production capacities reach 600,000, 350,000
and 200,000 units, respectively
Hyundai-Kia Manufacturing Facilities
Hyundai Motor’s Tech. C/T
Hyundai Motor
Kia Motor
Sohari
0.35 million
NamYang
Tech. C/T
Mabuk Tech. C/T
Hwasung
0.6 million
Asan
0.3 million
World’s Largest Single Car
Manufacturing Complex
Jeonju
0.1 million
Korea’s Auto Industry - Today and Tomorrow
Gwanju
0.2 million
Ulsan 1.6 million
5,600 cars/day
08 I 0 9
Jeonju
Tech. C/T
GM Daewoo Auto & Technology Company, in which the world’s largest automaker, General
Motors has invested, has been operating assembly lines in Bupyeong, Incheon, Gunsan and
Changwon, capable of manufacturing more than 1 million cars annually. GM, besides its
ongoing Powertrain (Engine & Transmission) project, and the investment in a testing track in
Incheon and diesel engine factory in Gunsan, will continuously increase its investment to
become a global auto development base, not to mention playing a leading role in Asia.
GM Daewoo s production lines
GM Daewoo s Bupyeong factory, covering an area of 990,000m to accommodate the engine
factory and R&D center, is capable of manufacturing 500,000 passenger cars annually.
GM Daewoo s Gunsan factory, built on a 1,221,000m site commenced operations in 1997,
is equipped with a test-run track and shipping yard and is designed to produce 300,000 cars
annually.
GM Daewoo s Changwon factory, built on a 660,000m site commenced operations in 1991,
and was designed to produce a combined total 240,000 units of compact cars and micro
compact cars for the first time in Korea.
SsangYong Motor Company specializing in SUV and RV vehicles, has production lines in
Pyeongtaek and engine factory in Changwon.
SsangYong s Pyeongtaek plant, built on a 1000,000m site and equipped with an R&D
center and production lines, is capable of producing 250,000 cars annually. Among the parts
manufactured in the Changwon factory are diverse engines including common rail Di engines,
diesel turbo intercooler engines and gasoline engines, and core driving gears for 4-wheel-drive
cars such as trans axle and rear axle.
Renault Samsung Motors, founded in Sept. 2000 and built on a 1,650,000m site, has a stateof-the-art production facility capable of manufacturing 240,000 units annually. The production
lines were designed mostly for manufacturing passenger cars, but with a blueprint to
manufacture new models such as SUVs, it is considering building a next-generation gasoline
engine factory, investing KRW600 billion over three years till 2007.
Hyundai-Kia Group is the nation’s largest and worldwide car manufacturer with a rosy future
blueprint to become one of the world’s leading car manufacturers. With a stable share of the
domestic market, it has an ambitious plan to gradually expand its sales to the global market.
Hyundai’s long-term strategy aims at becoming a global top-5, making inroads into China,
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
European nations and North America. It aims to sustain its current 60% domestic market share,
while maintaining a strong portfolio and healthy financial standing.
According to AUTOFACTS, Hyundai-Kia’s output ranked 9th worldwide in 2003 and it is
expected to reach 3 million cars in the domestic market and 2 million in overseas markets,
making a combined total of 5 million, to become eligible to be rated as a Global Big-5.
KMS, SlovaKia, 0.30 mil
BHMC, China, 0.15 mil
DYKM, China, 0.06 mil
(0.3 mil/2005) (0.6 mil/2008)
(0.13 mil/’06), (0.43 mil/’08)
Under
construction
Total
0.5 mil. Cars/’04
0.9 mil. Cars/’05
2 mil. Cars/’10
HMMA, US/ 0.30 mil
Hyundai-Kia’s overseas production capacity and expansion plans
Hyundai
Kia
(in mil./yr.)
Nation
Firm
2004
2006
2008
2010
USA
HMMA
-
0.3
0.3
0.5
India
HMI
0.25
0.3
0.4
0.4
Turkey
HAOS
0.06
0.06
0.3
0.3
China
BHMC
0.15
0.3
0.6
0.6
China
DYKM
0.06
0.13
0.43
0.43
Slovakia
KMS
-
0.3
0.3
0.3
0.52
1.39
2.33
2.53
Total Capacity
Source: Various reports and data
Korea’s Auto Industry - Today and Tomorrow
HMI, India/0.25mil
10 I 11
HAOS, Turkey/0.06 mil.
Local car manufacturers operating abroad
Hyundai-Kia
Nation
Hyundai
Kia
Company name
( artners)
Production
Capacity
(As of March 2004)
Production start
Date
Note
Malaysia
Industri Otomotif
Komersial
Malaysia
35,000
99.10
TAA
Taiwan
N/A
45,000
2001.2
TAA
Russia
Dornlnvest
10,000
2003.3
TAA
Venezuel
M.A.V
30,000
96.6
TAA
Sudan
SMT
10,000
2002.7
TAA
Egypt
Prima
Engineering
Industries
15,000
95.2
TAA
India
Hyundai Motor
India
120,000
98.10
Stake 100%
Indonesia
CMN
20,000
2001.2
China
Beijing Hyundai
江淮汽車(KangHwe)
榮成汽(YoungSung)
100,000
50,000
10,000
2002.12
2001.10
2000.9
50% Stake
TAA
-
Turkey
HAOS
60,000
97.7
50% Stake
Pakistan
DFML
20,000
99.10
TAA
Russia
AVTOTOR
10,000
99.9
TAA
China
Dongfeng Yueda
Kia Motors Co., Ltd
50,000
2002.7
50%Stake
Iran
SAIPA
20,000
93.8
TAA
Egypt
WAMCO
10,000
98.1
TAA
Morocco
BERLIET
MAROC
1,000
2001.6
TAA
Pakistan
DFML
20,000
99.7
TAA
Ecuador
AYMESA
11,000
Suspended
Vietnam
VMC
20,000
93.4
TAA
Malaysia
NKSB
10,000
2001.5
TAA
Thailand
YONTRAKIT
20,000
2003.1
TAA
Indonesia
Timor PUTRA
Motors KIM
30,000
5,000
Suspended
2003.11
TAA
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
GM Daewoo Auto & Technology Company
Nation
(As of March 2004)
Company name
Production
Production start
(Partners)
capacity
date
Poland
DW FSO
4,315
96.4
N/A
Rumania
RODAE
21,746
N/A
N/A
Uzbekistan
N/A
46,474
N/A
N/A
China
N/A
46,932
94.8
N/A
Note
India
DMIL
5,880
95.7
N/A
Taiwan
N/A
5,547
N/A
N/A
N/A
Thailand
N/A
8,554
N/A
Vietnam
Vietnam DW
Motor
4,392
N/A
Egypt
DW Motor Egypt
3,890
98.7
N/A
Columbia
N/A
72
N/A
N/A
SsangYong Motor Company
Nation
Vietnam
N/A
(As of March 2004)
Company name
Production
Production start
(Partners)
capacity
date
Melcong CO.
456
97.1
TAA
Mercedes-Benz
2,844
96.9
TAA
Note
N/A
3,492
N/A
N/A
Iran
N/A
720
N/A
N/A
Source: 1.Source: KAICA
2.TAA: Technical Assistance Agreement
3.Production capacity of GM Daewoo and SsangYong were based on 2003
performance
12 I 13
China
Korea’s Auto Industry - Today and Tomorrow
Vietnam Ltd.
4. Korean Auto Parts Industry & Manufacturers
Korea s Rapidly-Growing Auto Parts Industry, though it suffered a downturn in the wake
of the 1997 foreign currency crisis, has sustained an annual growth of 10% on average, and is
forecast to continue annual growth of 9.6% till 2015.
Sales trends of Korea’s auto parts industry
(in KRW100 mil, %)
Sales
Growth rate
OEM
A/S
Export
Total
1990
50,234
4,020
3,546
57,800
1995
118,425
8,290
6,979
133,694
18.3
2000
199,214
12,949
16,860
229,023
11.4
2001
205,331
13,346
20,349
239,026
4.4
2002
237,622
15,445
20,890
273,957
14.6
2003
260,602
18,242
41,544
320,388
16.9
-
Source: KAICA, Auto Industry Book 2004
Growth outlook for Korea’s auto parts industry
(in KRW100 mil, %)
Average annual growth
2002
2003
2005
2010
2015
Engine
parts
3,285
4,061
5,442
7,564
Chassis
parts
4,975
6,310
7,880
10,240
Others
16,738
21,119
26,990
35,891
51,111
5.9
7.3
7.6
Total
24,998
31,490
40,312
53,695
75,506
5.9
7.1
9.6
Source: KIET, S.TRADE report (Dec 2004)
2005~
2010
2010~
2015
2003~
2015
10,970
6.8
7.7
8.6
13,425
5.4
5.6
6.5
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Some of the features of Korea s auto parts industry
First, its small and medium-centered industrial structure. The parts manufacturers
directly dealing with auto manufacturers totaled 878, with 154,000 employees (as of 2003).
Among them, the manufacturers categorized into large-sized companies (capital of KRW8
billion or more with 300 or more employees) accounted for 7.9% or 69 manufacturers. But the
number of companies with more than 1,001 employees totaled around 30.
Number of firms
Large companies
Small & medium
Total
69 (7.9%)
809 (92.1%)
878
Total output of parts manufacturers directly dealing with auto manufacturers in 2003 amounted
to KRW26.602 trillion. Average output per manufacturer was KRW29.68 billion. When
detailing it by scale of manufacturer, the small company-group accounted for 1.9% (KRW1.8
billion in an average value), medium companies 48.2% (KRW23.5 billion) and large ones
49.9% (KRW188.5 billion), which clearly indicated large gaps among the companies.
Number of parent companies to deal with
Total
1
2
3
4
5
6
No of
suppliers
450
217
94
61
34
22
878
%
51.3
24.7
10.7
6.9
3.9
2.5
100
14 I 15
Number of multi-transaction companies
(Based on Hyundai, Kia, GM Daewoo, SsangYong, R-Samsung, Daewoo Bus)
Korea’s Auto Industry - Today and Tomorrow
Second, heavy dependence on the parent company. Whereas Toyota, capable of
manufacturing 7 million cars a year, had only 200 parts suppliers in 2003, Hyundai which sold
1.67 million cars, had as many as 355, which means Hyundai whose output reached a mere
one-fourth of Toyota, rather had far more suppliers. Of parts manufacturers, those supplying the
parts to a single manufacturer accounted for 51%, heavily depending on the parent company.
However, as price and quality-centered procurement practices have been taking root, the
hierarchical trend is losing its power.
Third, relatively low commitment to exports. Whereas exports of electronic parts account
for 70%, auto parts comprised a mere 18.2%, heavily depending on domestic consumption,
compared with Japan’s 47.9% and the United States’ 205.3%. Such a trend resulted from a lack
of suppliers with a large-scale global system, unlike the cases in the United States or Japan.
Current status of Korean auto parts manufacturers Auto parts manufacturers with more
than five employees totaled 3,328 as of the end of 2002. The breakdown is 532 for engine parts,
526 for chassis parts and 2,270 for other parts.
Auto parts manufacturers by type of product (2002)
(in KRW billion)
Parts
No of
manufacturers
Employee
Output
Value added
Engine
532
19,463
3,235
1,330
Chassis
526
23,861
4,975
1,901
Others
2,270
23,861
16,738
5,921
Total
3,328
86,174
24,948
9,152
Korean auto parts industry s subcontract structure Viewing the outsourcing rate, a major
index indicating the auto parts industry’s subcontracting structure, auto manufacturers
independently produced 37% of major components and parts needed, while the remaining 63%
were acquired through the outsourcing.
In contrast, parts and material suppliers produced 51% of the orders they received from auto
manufacturers, while the remaining 49% were re-ordered by the subcontractors. Reasons for
outsourcing to the subcontractors included the lower costs, first of all, and secondly the fact that
the volume is too small for in-house production, so outsourcing is considered to be more costefficient.
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
In-house production versus outsourcing
Assembly/Process firm
Part/Material suppliers
In-house production
37%
51%
Outsourcing
63%
49%
Source: KIET, Subcontract status in Korean industry 2004
Bidding system in Auto Industry. For traditional technologies or products, both the
assembly/process and parts/material industries adopted price competitive bidding, which was
offered based on auto manufacturers’ designs.
Bidding for existing product
Bidding method
Assembly/Process
Parts/Material
Based on auto manufacturers’ designs
Price competition-based bidding
44%
48%
Based on auto manufacturers’ designs
Technology development-based bidding
17%
16%
Open price competition bid
17%
24%
Others
22%
16%
Source: KIET, Subcontract status in Korean industry 2004
For new technology or products, both the assembly/process and parts/material industries
adopted price competitive bidding based on auto manufacturers’ designs.
Assembly/Process
Parts/Material
Based on auto manufacturers’ designs
Price competition-based bidding
50%
54%
Based on auto manufacturers’ designs
Technology development-based bidding
17%
17%
Open price competition bidding
11%
24%
Others
22%
5%
Source: KIET, Subcontract status in Korean industry 2004
16 I 17
Bidding method
Korea’s Auto Industry - Today and Tomorrow
Bidding for new technology products
Subcontractors by auto manufacturer The numbers of subcontractors of Hyundai and Kia
were 355, and 395, respectively, which were the nation’s 2nd and 1st largest by number,
followed by GM Daewoo, SsangYong and Renault Samsung.
Hyundai
Kia
GM Daewoo
SsangYong
RSM
No of
subcontractors
355
395
273
243
125
Employees
161,415
166,774
109,905
104,231
100,914
Average
employee per
subcontractor
454.7
422.2
402.6
428.9
807.3
Source: Auto Book, KAICA 2004
5. Auto Parts Manufacturers by core component
Auto parts can be categorized by various ways such as role and function, type of raw material,
processing method and the sequence in assembly line. Among them, categorization based on its
function is most commonly used. The structure of an automobile comprises the body and
chassis. The body serves as the framework for the automobile, providing the space for
passengers and cargo, as well as to protect the parts, including the engine. The chassis is the
remainder, which is classified by its function into the power-generation part, the powertransmission part, the steering device, braking system, suspension system and electrical system.
The charts below represent the major local suppliers of auto parts and components.
Major local suppliers of auto parts and components
Power Generation Parts
Classification
Engine Body
Name of parts
Manufacturer (Customer)
Piston, Camshaft, Crankshaft,
Connecting rods, Bellows
Auto manufacturers (Hyundai,
Kia, GMDAT, SsangYong)
Daechang Forging (Hyundai)
Korea Flange (Hyundai)
Yoosung Enterprise (Hyundai,
Kia, GMDAT)
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Radiator, Cooling fan
& motor
Halla Climate Control (Hyundai-Kia)
Samsung Climate Control (HyundaiKia, GMDAT, SsangYong)
Three Star (Hyundai-Kia, GMDAT,
SsangYong)
Modine (Hyundai-Kia)
Korea Delphi (GMDAT)
Daehan Calsonic (SsangYong)
Fuel supply parts
Fuel pump, Water pump,
Oil pump, Oil tank, Fuel
tank, Oil filter
GMB Korea (Hyundau-Kia, GMDAT)
Denso PoongSung Electronic
(Hyundai-Kia)
TI Automotive(Kia, GMDAT)
Inergy Automotive (Hyundai)
Intake & Exhaustion parts
Air filter, Muffler, Throttle
body
Sejong Industrial (Hyundai)
Sejung (Hyundai-Kia)
Daewoo Precision (GMDAT)
Cooling Unit
Power Transmission Parts
T/M assembly, gear, shaft, Auto manufacturer (Hyundai, Kia)
Hyundai Dymos (Hyundai-Kia,
T/M Oil pump
GMDAT, SsangYong)
GM Powertrain (GMDAT)
Hyundai Powertech (Hyundai-Kia)
Wia (Hyundai-Kia)
C.V Joint, rear axle,
universal joint
Wia (Hyundai-Kia)
Korea Delphi (GMDAT)
Hyundai Dymos (Hyundai-Kia,
GMDAT, SsangYong)
Tongil Heavy Industrial (SsangYong)
Korea Flange (Hyundai)
Engine gear, T/M gear,
Axle gear
Wia (Hyundai-Kia)
Hyundai Dymos (Hyundai-Kia,
SsangYong)
Daeil Industrial (Hyundai-Kia)
Iljun Bearing (Hyundai, GMDAT)
Axle
Gear Parts
Manufacturer (Customer)
Korea’s Auto Industry - Today and Tomorrow
Transmission
Parts name
18 I 1 9
Classification
Suspension Parts
Classification
Parts name
Shock absorber
Mando (Hyundai-Kia, GMDAT,
SsangYong)
GM Powertrain (GM DAT)
Kasco (Kia)
Cross & side member, Coil
spring, Suspension,
stabilizer bar, Front & rear
suspension module
Daewon (Hyundai-Kia, GMDAT,
SsangYong)
Yoonyoung (GMDAT)
SL Corporation (Hyundai-Kia,
GMDAT)
Shock-Absorber
Front & Rear suspension
Steering parts
Manufacturer (Customer)
Mando (Hyundai)
Steering gear & column,
Steering Knuckle, Steering Korea TRW (Hyunddai-Kia, GMDAT)
SL Corporation (Hyundai-Kia,
wheel
GMDAT)
Korea Delphi (GMDAT)
Hwashin (Hyundai)
Brake Parts
Classification
Parts name
Brake corner module
Brake system
Disc, Drum & Hub, Lining
& pad, proportional valve
Brake parts
Manufacturer (Customer)
Hyundai Mobis (Hyundai-Kia)
Mando (Hyundai, SsangYong)
Korea Delphi (GMDAT)
Kasco (Kia)
Central (Hyundai-Kia, GMDAT)
Sangshin Brake (Hyundai)
Korea Beral (Hyundai-Kia, GMDAT)
Mando (Hyundai, SsangYong)
Korea Delphi (GMDAT)
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Electric Parts
Manufacturer (Customer)
Alternator
Alternator
Denso PoongSung Electric (Kia)
Delco Remy (Hyundai, GMDAT)
Korea Delphi (GMDAT, Renault Samsung)
Valeo Electric System (Hyundai-Kia, GMDAT)
Kasco (Kia)
Battery
Battery
Delco (GMDAT)
Atlas BX (Kia, GMDAT)
Global battery (Hyundai, GMDAT, SsangYong)
Sungwoo Automotive (Hyundai)
Distributing wire
Cable, connector
Kyung Chang Industrial (Hyundai)
Hangjin Industrial (Kia, GMDAT, SsangYong)
Korea Electric Terminal (Hyundai-Kia,
SsangYong)
Motor
ABS, door lock, fan,
heater, power window,
wiper, seat, sunroof
Denso PoongSung Electric (Hyundai-Kia, GMDAT)
Dongyang Mechatronics (GMDAT, SsangYong)
KAMCO (Hyundai)
GM Powertrain (GMDAT)
Switch
Oil pressure, powerwindow, etc.
INZI Controls (Hyundai, Kia, GMDAT)
Daesung Electric (Hyundai)
Shinchang Electric (Hyundai, Kia, GMDAT)
Il-Heung (Kia, GMDAT)
Eaton Automotive Controls (Hyundai-Kia,
GMDAT)
Sensor
Airbag, heat &
temperature,
crankshaft, wheel
speed, air-flow
Starter
Starter motor
Lamp
Headlamp, Room-lamp,
Side-lamp, fog-lamp
INZI Controls (Kia, GMDAT)
Unick (Hyundai, GMDAT)
Siemens VDO Halla (Hyundai)
KEFICO (Hyundai-Kia)
Korea Robert Bosch (Kia)
Denso PoongSung Electric (Kia)
Delco Remy (Hyundai, GMDAT, SsangYong)
Valeo (Hyunddai-Kia, GMDAT)
Korea Delphi (GMDAT)
SL Corporation (Hyundai-Kia, GMDAT,
SsangYong)
SL Lightech (Kia, GMDAT SsangYong)
Il-Heung (Kia, GMDAT, SsangYong)
Shin Woo Mechatronics (GMDAT)
Korea’s Auto Industry - Today and Tomorrow
Parts name
20 I 21
Classification
Classification
Car Audio
Parts name
Navigation, car audio
Manufacturer
Hyundai Autonet (Hyundai)
Sepung Electronic (Hyundai-Kia, GMDAT,
SsangYong)
Valeo Electric (Hyundai)
HVAC & Compressors
Classification
Parts name
HVAC products
Condenser, Evaporator,
Heater, A/C module
Compressor
Air-conditioning
compressor
Manufacturer (Customer)
Halla Climate Controls (Hyundai-Kia)
Doowon Climate Control (Hyundai-Kia)
Denso PoongSung Electric (Hyundai-Kia,
GMDAT)
Korea Delphi (GMDAT)
Daehan Calsonic (SsangYong)
Halla Climate Controls (Hyundai-Kia)
Korea Delphi (GMDAT)
Doowon Climate Control (Hyundai-Kia)
Zexel Valeo (SsangYong)
Other Parts
Classification
Parts name
Air-bag
Air-bag
Mirror
Rear, Outside view
Manufacturer (Customer)
Delphi Sungwoo (Hyundai)
Autoliv Mando (Hyundai)
Hyundai Mobis (Hyundai)
Kasco (Kia)
GM Powertrain (GMDAT)
Korea Delphi (GMDAT)
Sambu (Kia)
Schefenacker PoongJeong (Hyundai-Kia,
GMDAT, SsangYong)
Wooyoung Mirror (Hyundai-Kia, GMDAT)
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Classification
Parts name
Manufacturer (Customer)
Tire & Wheel
Tire, AL wheel, wheel
cover
Hankook Tire (All auto manufacturers)
Kumho Tire (All auto manufacturers)
Nexen Tire (All auto manufacturers)
Yoonyoung (GMDAT, SsangYong, Renault
Samsung)
Rubber product
Weather strip, rubber
bushing, rubber hose
Pyung Hwa Industrial (HyundaiKia,GMDAT)
Hwa Seung R&A (Hyundai-Kia, GMDAT)
Kunhwa Trelleborg (Hyundai-Kia, GMDAT,
SsangYong)
Se-Myung Industrial (Hyundai, SsangYong)
Seat
Seat, Seat belt
Filter
Oil filter, Fuel filter,
Air filter
KORYO (GMDAT)
Hanil E-Hwa (Hyundai)
Hanil (Hyundai, SsangYong)
Hyundai Motors Seat Division (Hyundai)
Daewon Kang Up(GMDAT, SsangYong)
Daewon Industrial (Kia)
Dayou A-Tech (Hyundai-Kia)
JCI Korea (Kia)
Dae-Ki Automotive (Kia, GMDAT, SsangYong)
Dongwoo Mann & Hummel (Hyundai, GMDAT)
Samwon Industries (Hyundai-Kia, GMDAT,
SsangYong)
Mahle Donghyun Filter system (Hyundai)
Powertrain Module
Cockpit Module
Frontend Module
Important parts name
Manufacturer (Customer)
Engine, Transmission
All auto manufacturers
Crash pad, Instrument
panel, Audio, Dashboard,
HVAC System
Hyundai Mobis (Hyundai-Kia)
Duck-Yang Industrial (Hyundai)
Cooling module,
Headlamp, bumper
Hyundai Mobis (Hyundai-Kia)
22 I 23
Classification
Korea’s Auto Industry - Today and Tomorrow
Module Supplier
Chassis Module
(Front & Rear)
Suspension Module, Brake
corner Module,
Damper module
Axle assembly
Cooling Module
CRFM(Condenser, Radiator, Halla Climate Controls (Hyundai-Kia)
Fan & Shroud Module)
Denso PoogSung Electric (Hyundai-Kia)
Door Module
Door panel, Door lock unit,
Powerwindow unit,
Speaker, Door trim
Hyundai Mobis (Hyundai-Kia)
Mando (Hyundai)
Korea Flange (Hyundai-Kia)
Donghee Industrial (Hyundai)
Myung-Hwa Industrial (Hyundai-Kia)
Daewoo Precision (GMDAT)
Korea Delphi (GMDAT)
Pyunghwa Precision (Hyundai-Kia)
6. Multinational Auto Parts Manufacturers in Korea
Foreign direct investment in Korea’s auto industry. The number of auto parts subcontractors
directly supplying parts and components in Korea totaled 878 as of the end of 2003. Among
them, large-sized companies numbered 69, while there were 809 small & medium companies.
Of the total, the 148 foreign-invested firms accounted for 16.9%. The number of foreign
advanced parts manufacturers investing in Korea outnumbered those in Japan, supplying about
one-third of total demand by local auto manufacturers. Foreign investment has prompted the
domestic auto parts industry to streamline the organization and sharpen their competitiveness as
well. Direct investment by foreign auto manufacturers in the domestic industry as of the end of
2003 totaled 227 cases, worth US$236.61 billion. Breaking it down by nation, Japan ranked
first, followed by the United States, Germany, the Netherlands, the UK and France
Foreign Direct Investment by nation
Nation
Case
Japan
USA
(In 1,000 US$)
Amount
Nation
Case
Amount
104
440,322
Australia
3
7,539
54
758,830
Sweden
3
41,074
Germany
27
473,655
Spain
2
5,002
Netherlands
9
245,156
Singapore
2
17,068
UK
7
54,773
Italy
2
1,688
France
7
260,399
Canada
1
5,639
Source: KAICA, Auto Industry Book 2004
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
The number of foreign auto manufacturers operating in Korea has been on the rise. According
to KAICA, the number of foreign-invested auto parts manufacturers including tier 2 or 3
reached 227 as of 2003 year-end, which accounted for 19.3% of the total in Korea. Foreigninvested firms recently supplied 35% of the total demand of Hyundai and Kia. Foreign
investors’ market share in Korea is expected to rise in line with rapidly increasing investment.
The auto industry’s facility investment in 2003 marked around US$2.5 billion, up 25% from a
year ago. The production, particularly in exports, has been soaring. Foreign investment is thus
forecast to increase further, beginning in 2005 when diesel engine passenger cars will be put on
the market.
Global Top-20 Operating in Korea
Performance
Company
Delphi
Two R&D centers and six joint ventures in Korea.
Robert Bosch
Six enterprises with 1,330 employees
Denso
Three factories, one joint venture and one sales & marketing office
Visteon
Halla CC, an affiliate of Visteon is nation’s third largest supplier. It has a
number of joint-venture interior material manufacturers.
Lear
Producing seat products at three factories owned by two companies.
Magna
Has a number of factories.
Johnson Control
Has a factory producing auto interior products and parts
Aisin Seiki
Has a sales & marketing office.
Faurecia
Took over exhaust system from Jangheung Precision.
One joint venture, one technical tie-up partner and two production lines in
operation
Simense VDO
Two joint ventures manufacturing auto electronic parts
Valeo
Three factories in operation
ZF
Two factories in operation.
Dana
Diverse facilities in operation.
Continental
Representative office
ThyssenKrupp
Auto-related tie-up under consideration
Yazaki
One manufacturing facility in operation
DuPont
Three bases, including Dupont, a limited company, and Dupont Photomask, and DSI
Calsonic Kansei
Four manufacturers including CESKOR that supplies exhaust system.
Autolib
A joint venture partner of Mando
Source: A&D monthly report, 01/2005 edition.
24 I 25
Automotive
Korea’s Auto Industry - Today and Tomorrow
Specializing in manufacturing catalyst in collaboration with Daegi Ind.
TRW
Investment by global top-100 auto parts manufacturers. Among the world’s 100 largest
auto parts manufacturers, 34 firms have invested in Korea, which outnumber those investing in
Japan. When including the top-100 of relevant industries such as tire manufacturers, the
number of those who have invested or are considering investing will increase to 47.
Investment by global top-100 auto parts manufacturers
Ranking
(‘03)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Name of foreign investors
Delphi Corp.
Robert Bosch GmbH
Denso Corp.
Visteon Corp.
Lear Corp.
Magna International Inc.
Johnson Controls Inc.
Aisin Seiki Co. Ltd
Faurecia
TRW Automotive Inc.
Siemens VDO Automotive
Valeo SA
ZF Friedrichshafen AG
Dana Corp
Continental AG
ThyssenKrupp Atomotive AG
Yazaki Corp.
Dupont
CalsonicKansei Corp.
Autoliv Inc.
Michelin Group
Koyo Seiko Co. Ltd
Collins & Aikman Corp.
ArvinMeritor Inc.
GKN PLC UK
American Axle & Manufacturing
Holdings Inc.
Takata Corp.
Bridgestone/Firestone Inc.
Freudenberg & Co.
Benteler Automobiltechnik GmbH
Goodyear Tire & Rubber Co.
Hitachi Ltd. Automotive Products
Sales
(in US$ million)
Investment
26,200
23,200
16,856
16,513
15,747
15,345
15,192
13,534
12,700
11,300
9,500
8,879
8,200
7,918
7,600
7,300
5,900
5,510
5,436
5,301
4,676
4,062
3,984
3,915
3,890
3,683
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
No investment
Investment
Investment
Investment
Investment
Investment
No investment
No investment
Investment
Investment
No investment
3,450
3,420
3,400
3,400
3,296
3,284
Investment
No investment
No investment
No investment
No investment
Investment
Korea’s Auto Industry - Today and Tomorrow
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
Panasonic Automotive Systems Co.
Toyota Gosei Co. Ltd.
Mahle GmbH
Motorola Inc.
Federal-Mogul Corp.
Magneti Marelli S.p.A
Tenneco Automotive Inc.
Tower Automotive Inc.
Alcoa Center for Transportation
Products
NSK Ltd.
BorgWaner Inc.
Mitsubishi Electric Corp.
Cummins Engine Corp.
BASF AG
Dura Automotive Systems Inc.
Behr GmbH & Co.KG
Hella KG Hueck & Co.
Honeywell International
Stanley Electric Co. Ltd.
TI Automotive Ltd.
Tokai Rika Co.Ltd.
Brose Fahrzeugteile GmbH & Co.
PPG Industries Inc.
Compagine de Saint-Gobain
Kolbenschmidt Pierburg AG
Navistar International
Hayes Lemmerz International Inc.
Asahai Glass Co. Ltd.
NTN Corp.
Plastic Omnium Co.
Cooper Tire & Rubber Co.
Showa Corp.
NHK Spring Co. Ltd
Eaton Corp.
New Venture Gear Inc.
Alcoa Fujikura Ltd.
Metaldyne Corp.
Rieter Automotive Management AG
Webasto AG
Flex-N-Gate Corp.
Timken Co.
3,200
3,162
3,109
2,949
2,939
2,886
837
2,816
2,800
No investment
No investment
Investment
Investment
Investment
No investment
No investment
Investment
No investment
2,791
2,741
2,735
2,607
2,400
2,381
2,353
2,332
2,300
2,276
2,189
2,188
2,122
2,100
2,089
2,050
1,956
1,900.
1,800
1,790
1,765
1,700
1,636
1,616
1,465
1,448
1,430
1,412
1,400
1,367
1,350
1,396
No investment
Investment
Investment
Investment
Investment
No Investment
Investment
Investment
No Investment
Investment
Investment
Investment
Investment
No investment
No investment
No investment
No investment
No investment
Investment
No investment
No investment
No investment
No investment
No investment
Investment
No investment
No investment
Investment
No investment
No investment
No investment
No investment
26 I 27
33
34
35
36
37
38
39
40
41
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
Plikington PLC
Hutchinson SA
Wilhelm Karmann GmbH
J.Eberspacher GmbH & Co. KG
Mando Corp.
Alcan Inc.
Tomkins PLC
Inergy Automoitv Systems
Key Safety Systems Inc.
Dow Automotive
SKF Automotive Division
Schefenacker International AG
3M Automotive
Meridian Automotive Systems
Oxford Automotive Inc.
Clarion Co. Ltd
F-Tech Inc.
Venture Industries
Mitsui Kinzoku
Grupo Antolin
Auto Chassis International
Edscha AG
Alps Electric Co. Ltd.
Pioneer Corp.
Teksid Aluminum
Nemak SA
Superior Industries International Inc.
1,340
1,318
1,300
1,300
1,300
1,250
1,229
1,200
1,200
1,127
1,120
1,119
1,030
1,025
1,007
1,006
1,001
1,000
1,000
998
960
950
910
903
894
844
840
No investment
No investment
No investment
No investment
Investment
No investment
No investment
Investment
No investment
No investment
No investment
Investment
Investment
No investment
No investment
No investment
No investment
No investment
No investment
Investment
No investment
No investment
Investment
No investment
No investment
No investment
No investment
7. Background to Investment by Multinational Auto
Parts Manufacturers in Korea
Reasons for investment by multinational auto parts manufacturers. In most cases, it was
aimed at making inroads into the Korean market, and establishing a bridgehead to the Chinese
or Japanese markets, and securing low-cost labor. Foreign investors’ strategy for marketing was
thus focused on localization. Those securing a market share of more than 31% accounted for
31% of the firms surveyed.
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
When it comes to General Motors, the largest foreign investor operating in Korea, the priorities
they considered before determining their investment were, first, the scale of the market (one of
Asia’s three largest markets and one of the world’s four fastest-growing markets); and secondly,
Korea’s excellent technologies; and thirdly, Koreans’ productivity. Other reasons include
Korea’s strategic geographical location and globalization. GM appeared to have made a
decision on investment in Korea based on its market-oriented strategy, taking into account the
benefits offered by Korea such as high technologies and productivity, domestic consumption
and a huge potential neighboring market.
In view of the aforementioned reasons for advancing into Korean market by foreign auto
manufacturers, decisive factors appear to be advancing into the Korean market as well as the
Chinese and Japanese markets, and low-labor costs, availability of highly-skilled workforce,
and the incentives for specialized technologies, government support, raw material supply and
exemption from import restriction regulations.
10
5
3.7
2.7
4.1
3.7
5.1
4.4
3.1
3.3
Government
support
Others
2.5
0
Securing
raw material
Using technical
manpower
Specialization
of Technology
Low labor cost Penetration into
market
Advance into
Chinese/Japan
market)
Avoidance of
import restriction
Foreign-invested businesses marketing trends. Eighty percent of locally manufactured
products were sold in the domestic market, and very few of them were shipped to their home
countries. Thus their investments were mainly aimed at the Korean market (71.2%)
60
40
20
15.6
13.6
0
5.6
Korean market
5.6
Asian market
7.9
Domestic market
5.6
Other market
28 I 29
71.2
Korea’s Auto Industry - Today and Tomorrow
80
Benefits compared with investment in China, Japan and other countries in the Asian
region. The global auto market is tending to move to Northeast Asia after Europe and the
USA, and the attraction of the auto parts market environment in Korea has been increasingly
improved for potential investors.
More importantly, in the ever-improving Korean auto parts market environment, the
hierarchical transaction practice of auto manufacturers in Korea has been gradually eased and
rationalized to establish fair transaction relationships. Furthermore, the big manufacturers’ sales
have continued their upward trend, thus sustaining the stable growth of the auto parts industry,
while sales of foreign manufacturers operating or planning to operate in Korea have been on
the rise. Since Korea is situated in the hub of Northeast Asia, which has the greatest growth
potential in the world, it provides better benefits for making inroads into the Chinese market or
the Southeast region. Besides, it effectively provides qualified engineering manpower, and a
good environment for developing electronic devices within a short time, compared with most
other countries, thanks to the availability of Korea’s highly advanced IT technology.
Comparing Korea s auto parts investment environment with China, the advantages and
disadvantages can be described as follows:
Advantages: Infrastructure for parts and materials, manufacturing and quality control, export
marketing capability, IT and related industries, competitiveness in technologies and quality.
Highly-qualified workforce
High productivity and quick adaptability to changes
Abundant demand for components and material
Perfect test-bed for new products and services for other Asian markets
Well-developed infrastructure
World-class ICT infrastructure
Better protection of intellectual property
Disadvantages: Relatively high labor cost-structure
Relatively smaller domestic market
Relatively confrontational labor-management relations
Forecasted competitiveness in auto parts vis-a-vis Japan. Korea’s auto parts-related
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
technologies, which have been steadily improved, are expected to reach a similar level with
Japan, except for specific parts, by the year 2005. However a significant gap still exists in the
area of core technologies necessary for developing future intelligent cars.
Parts design
Production
lines
Production
technology
Quality
competitiveness
Overall
Brakes
95
100
100
100
98
ABS
95
100
100
100
98
Axle
95
100
100
100
98
Steering Products
90
100
100
95
96
Transmission
85
90
90
85
87
Products
High-
Telematics
85
95
95
95
92
Technology
Hybrid
50
32
32
-
38
for future
Fuel batteries
37
36
35
-
36
Vehicles
Intelligent
Electrical devices
25
90
90
60
66
42V
65
45
70
60
60
Low pollution
engine
85
85
95
85
87
Steer by Wire
50
10
50
-
36
30 I 31
Korea, an optimal destination for investment in auto parts. In line with Northeast Asia
emerging as the hub of the world auto industry, the geographical benefits of this region are
increasingly being highlighted. Japan, as a global economic power, has secured world-class
auto manufacturing technology on the back of the world’s second-largest auto market, while
China continues to shatter records for growth rate of both production and demand. With its
explosive potential in demand, China has surfaced as the contest stage of the global auto market
and industry. Korea has grown to become the world’s sixth-largest automaker within a short
time thanks to significant growth of its export-driven industry, and it is still growing. Asia’s
Big-3 has become the center of the world’s auto industry with their benefits and greatest market
Korea’s Auto Industry - Today and Tomorrow
Source: KDB, 2003 (one Japanese yen = 100 won)
potential. Of the three, Japan is relatively vulnerable because of high manufacturing costs. In
contrast, China has yet to secure the sophisticated technologies and infrastructure, despite its
rapid growth and high potential, to become an eligible investment destination. Korea, with its
well-developed infrastructure necessary for auto manufacture and high quality level, has been
equipped with high technical competitiveness and reasonable manufacturing costs, and has
geographical benefits that could serve as a bridgehead to the Chinese market to become the
optimal destination among the three countries, which global investors have been seeking.
8. Operation of Auto Part Business in Korea
Working system and operation. The working system of major auto parts manufacturers and
foreign manufacturers operating in Korea adopt two-shift work schedules, daytime and
nighttime, which is regarded as a typical work system. In case of office workers, working hours
are 08:00-19:00, a single-shift system, but a few manufacturers adopt a three-shift system,
although this is unusual in Korea. No significant differences were observed between domestic
and foreign manufacturers. The time between the shifts is generally accepted as overtime work.
Average annual working days. There is an average of 250 working days a year, with factory
operation ratio of 80% or more on average during Q4 in 2004.
Actual Examples of Working Hours in Auto Parts Manufacturers
Local firm
“M”
Local firm
“S”
Foreign-invested firm
“D”
Foreign-invested firm
“V”
Daytime
08:30~17:30
08:00~17:00
08:00~17:00
08:00~17:50
Overtime
17:30~19:30
17:00~21:00
17:00~21:00
18:00~21:00
Nighttime
21:00~06:00
21:00~06:00
23:00~08:00
21:00~06:00
Overtime
06:00~08:00
06:00~08:00
21:00~23:00
06:00~08:00
Others
Office workers: single shift, 40 hrs/week, with overtime work
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Recruitment (office workers and R&D positions)
A typical hiring method adopted by local manufacturers includes ordinary and extraordinary
recruitment. An annual ordinary recruitment is the typical practice adopted by large-size
manufacturers with 1,000 or more employees. Since the 1997 foreign currency crisis, which
triggered a large-scale restructuring, recruitment began changing to an as-needed basis, instead
of the traditional annual event-like practice.
Recruitment on the Internet. Some major auto parts manufacturers began recruiting their
manpower by advertising the recruitment on the Internet such as Pop-Up, so as to receive the
applications, from time to time.
Recruitment through industry-academic cooperation. Some of the major manufacturers
offer scholarships to college or graduate school students they previously selected to
secure eligible manpower in advance.
Open recruitment via the mass media The most typical practice adopted by the companies
when they need to hire a large number of employees is advertising in daily newspapers,
technical journals or college newspapers.
Recruiting through vocational centers. The companies at times provide some trainees who
have completed a certain training course at vocation centers with a minimal training program
required for jobsite service, before hiring.
Recruiting through personal recommendation. When requiring unskilled workers,
recommendations are received from existing employees, which is expected to shorten the
recruiting process, as well as relatively quick adaptation to the assignment.
32 I 33
Recruiting factory workers
Recruiting through schools (vocational or technical, or ordinary high school) The most
commonly applicable recruiting practice adopted by the businesses, which receive the
recommendation on eligible students from the vocational or technical high schools at
company’s request.
Korea’s Auto Industry - Today and Tomorrow
Recruitment using Search Firms (Head-Hunters). The use of recruitment firms when
hiring workforce specializing in a specific area, or experts in core sectors, or executives, is
becoming increasingly popular.
Labor costs. The wage level of the auto parts industry is relatively lower than that of assembly
manufacturers, but the wages of parts manufacturers belonging to large-sized business or
foreign-invested manufacturers are on a very similar level to those of auto manufacturers.
However, the small & medium-sized manufacturers still offer relatively low wages. The wages
of Korean auto parts manufacturers are determined by seniority or job description, rather than
labor’s skill or performance commonly adopted by advanced countries.
The table below describes the wage levels in general. This data represents average labor costs.
(The differences may vary by manufacturer or job grade, not corresponding to the table below)
(in US$, as of Nov 2004
Small/Mediumsized Company
Production
workers
Office Workers
Research Workers
Starting Salary
13,020
Large-sized
Company
21,700
Average
17,500
Within 5 yrs
16,100
24,500
20,500
Within 10 yrs
19,170
27,400
23,500
Over 10 yrs
20,685
29,700
25,200
Starting Salary
13,020
22,800
18,000
Within 5 yrs
16,100
28,500
22,500
Within 10 yrs
19,170
34,200
27,000
Over 10 yrs
20,685
40,000~68,500
35,000
Starting Salary
19,090
22,800
18,000
Within 5 yrs
22,280
28,500
22,500
Within 10 yrs
25,450
34,200
27,000
Over 10 yrs
28,640
4,000~68,500
35,000
Source: Data from municipal government offices
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
9. The Features of Major Industrial Complexes and
Detailed Infrastructures
Major auto parts storage facilities in Korea
Distributional features. Auto parts storage has a close relationship with the locations of the
major car makers, and they appear to have been affected by the development of parts /
material centers such as electrical, mechanical, electronic, plastic and steel components and
products, and the domestic market and distribution networks..
Auto parts storage area Distributed in Gyeonggi Province (Southwest), South Chungcheong
Province (North west), North Jeolla Province (Gunsan-Jeonju belt), South Gyeongsang
Province (Mid & South), Busan, Daegu, Incheon, Gwangju and Ulsan..
Gyeonggi Province Distributed in Southwestern region including Ansan, Siheung, Whasung
South Chungcheong Province Benefit of neighboring on Hyundai’s Asan and GM
Daewoo’s Gunsan factories.
North Jeolla Province Gunsan is located nearby GM Daewoo Factory, while Jeonju
neighbors the Hyundai commercial vehicle vendors.
South Gyeongsang Province Thanks to well-developed mechanical industry, GM Daewoo,
Renault Samsung and Hyundai Motors’ vendors are concentrated on the region.
Gwangju Most of the Kia vendors are distributed in the Gwangsan-gu and Seo-gu area.
Ulsan. The vendors of the nation’s largest car maker, Hyundai Motors, are concentrated
mainly in Ulsan, which is strongly connected with nearby Geejang and Wiilju-gun.
34 I 35
Daegu Mostly distributed in the Northwest in the vicinity of Sungseo industrial complex,
which is accessible to Changwon and Woosan via Guma and Gyungbu Expressway.
Incheon Many vendors of GM Daewoo, Kia and Hyundai are concentrated in the Incheon
and Gyeonggi Province area, including Namdong and Bupyeong industrial complex.
Korea’s Auto Industry - Today and Tomorrow
Busan Concentrated in the industrial complex area around Yangan near the downstream of
Nakdong River, and Geejang county, which connects with Ulsan, an automobile Mecca.
Renault Samsung-related vendors are concentrated in the Shinho industrial complex.
Hyundai
GM Daewoo
Kia
Renault Samsung
Gangwon-do
Bupyeong
Incheon/Gyeonggi-do
SSangYong
Gwangmyeong
Hwaseong
Pyeongtaek
Chungcheongbuk-do
A
Chungcheongnam-do
Gyeongsangbuk-do
Gunsan
Ulsan
Jeollabuk-do
Jeonju
Gyeongsangnam-do
Busan
Gwangju
Changwon
Jeollanam-do
Among the industrial complexes designed to be exclusive for the auto parts industry are foreign
enterprise-only complexes and free trade zones, besides the normal industrial complex (state or
regional).
Foreign enterprise-only complexes were planned and designated in consideration of rising
land prices that hindered foreign direct investment and factory-building investment
(Greenfield-type), and foreign investors’ preference for lease over procurement to reduce the
capital investment to provide the foreign enterprises with the land at a low cost.
Government s support regarding foreign enterprise-only complexes includes;
Rent. In the case of high technology businesses valued at US$1 million or more, the rent is
totally exempted, and in the case of general manufacturing firms investing US$5 million or
more, 75% of the rent is exempted.
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Tax benefits. For income tax and corporate tax, 100% of the tax is exempted for 5 years and
50% for another 3 years, when the tax belongs to national tax. When it comes to local tax
(acquisition tax, registration tax, property tax and integrated land tax), a 100% exemption is
granted for 5 years and 50% for another 3 years, after the date of acquisition, and a reduction
for a maximum 15 years will be possible in accordance with the municipal government’s
regulations. In the case of tariffs, special excise tax and value added tax, a 100% tax exemption
is granted on capital goods for 3 years after the declaration of investment.
Sale of land. Of the sites covering 4,615,000 m , as of Oct 2004, 63.9% or 2,950,000m , were
sold. And in the case of leases, 59.8% or 2,476,000m of 4,141,000m was completed.
Breaking it down by region, Chunan marked 100% completion in both sales and leases.
Viewing the remainder, Pyungdong marked 58%, Jinsa 53.6%, Daebul 38%, Gumi 38.6% and
Ohchang 29.2%. (differences in sales rates between the regions are estimated to have been
caused by inconsistent designation of the sites and different adjustment dates)
[As of Oct 2004]
Chunan
Chuan City
Gwangju City
Nanjeon-ri, Nabulra,
Baeksok, Saengsung,
Jangrok-dong,
Samho-myun, Youngam-
Chaam-dong area
Gwangsan-gu area
gun, South Jeolla Province
100% foreign-invested firm 100% foreign-invested firm 100% foreign-invested firm
Joint venture with
Joint venture with foreign Joint venture with foreign
foreign investment
investment amounting to
amounting to 30% or
10% or more
investment
more
Types of
business
eligible
1.High Tech Business by
the FIPA
2.High Tech Business by
MOCIE
1. High Tech Business by
the FIPA
2. High Tech Business by
MOCIE
3. New Tech Business with 3. Other general
NT Mark
Land scale
manufacture
1.High Tech Business by
the FIPA
2.High Tech Business by
MOCIE
3. Other general
manufacture
3,306m ~4,959m
6,612m or more
6,612m ~16,529m
(1,000Py~15,000Py)
(2,000Py or more)
(2,000Py~5,000Py)
Korea’s Auto Industry - Today and Tomorrow
Eligibility
Daebul
36 I 37
Location
Pyungdong
Chunan
Factory 714,000 m
T
Sale
O
T
Pyungdong
1,234,000 m
Daebul
1,614,000 m
491,382.6 m
957,977.9 m
1,614,441.4 m
(148,643 Py)
(289,788 Py)
(488,369Py)
22,749.9 m
19,835.1 m
431,096.2 m
A
(6,882 Py)
(6,000 Py)
(130,407 Py)
L
468,632.7 m
938,142.8 m
1,183,345.2 m
(141,761 Py)
(283,788 Py)
(357,962 Py)
(Area: 1000m /firm)
(Area: 1000m /firm)
(Area: 1000m /firm)
23/2(100%)
20/1(100%)
431/3(100%)
469/39(100%)
733/48(78%)
648/17(55%)
Lease
Sale
(%)
Lease
(%)
Price
S
KRW150,500/m
KRW86,515/m
KRW69,400/m
(KRW497,523/Py)
(KRW286,000/Py)
(KRW229,425/Py)
Down-payment 10%
By 5-year installment
Interim 30% (within 3M)
Balance: By 2-year installment
By 6-month installment
Balance 40% (within 6M)
(By 8-quarter installment)
A
L
Payment Down payment 30%
E
Rent
L
S
KRW121/m /M(KRW400/Py/M KRW40/m /M(KRW132/Py/M) KRW27/m /M(KRW89/Py/M)
Reduction High Tech with investment US$1 mil or more
General manufacture with investment US$5 mil: 75% reduction
Others
National tax (corporate, income): High Tech & Industry support service
-5-year exemption with 50% for another 2 years
Local tax
- Corporate, Registration, Property tax: 5-year exemption, 50% for another 3 years
(Exemption may be extended up to 15 years according to municipal government’s
regulations)
- Integrated land: Five-year exemption, 50% for another 3 years.
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Gumi
Location
In #4 complex in Gumi
Ohchang
Jinsa
Ohchang-myun,
Jinsa Industrial Complex
Chungwon-gun,
In Sanam-myun, Sachun
Chungcheong Province
City, South Gyeongsang
(In Ohchang Ind Complex)
Province
100% foreign-invested firm
Joint venture with foreign investment amounting to 30% or more
(Investment more than KRW50 million))
Types of
business
eligible
Land scale
T
O
T
A
L
Factory
Sale
Leas
1. High Tech Business in accordance with Foreign Investment Promotion Act
2. Advanced Business in accordance with Industry Development Act
3. Other general manufacture
8,265m or more
(2,500Py or more)
6,612m or more
(2,000Py or more)
559,000 m
496,000 m
559,347m (169,202.5Py) 559,347m (169,202.5Py)
495,870m (150,000Py)
495,870m (150,000Py)
6,612m or more
(2,000Py or more)
496,000 m
495,870m (150,000Py)
495,870m (150,000Py)
(Area: 1000m /firm)
Rent
L
S
Reduction
Others
KRWW109,000/m
-
227/6(46%)
226/8(54%)
KRW57,000/m
KRW103,000/m
-
KRW121/m /M(KRW400/Py/M) 4KRW0/m /M(KRW132/Py/M)
KRW27/m /M(KRW89/Py/M)
High Tech with investment of US$1 mil or more
General manufacturing with investment of US$5 mil: 75% reduction
National tax (corporate, income): High Tech & Industry support service
-Five-year exemption with 50% for another 2 years
Local tax
-Corporate, Registration, Property tax: 5-year exemption, 50% for another 3 years
(Exemption may be extended up to 15 years according to municipal government’s
regulations)
-Integrated land : 5-year exemption, 50% for another 3 years.
Korea’s Auto Industry - Today and Tomorrow
Price
S
A (posted)
L
E Payment
216/6(38.6 %)
38 I 39
Sale(%)
Lease(%)
Free trade zone. Export-free zones were established in Masan (1971) and Iksan (1974) in an
attempt to attract export-centered foreign direct investment, and they were officially renamed as
free trade zones in accordance with revised laws designating the free trade zones anew in Jan
2000.
Support for free trade zones
Rent. Rentals of around one-fifth level compared with other areas in Korea, with long-term
contracts of more than 10 years, which may be further extended.
Tax benefit. When moving to free trade zones, a five-year 100% tax exemption on corporate
and income tax is granted, and 50% reduction for another 2 years is also granted. Local tax
(acquisition, registration, property and integrated land tax) is 100% exempted for 5 years, with
50% exemption for another 3 years, which can be extended up to 8-15 years maximum. A
tariff, special excise tax and value-added tax on capital goods are also subject to exemption.
Free Trade Zones (2003)
Masan
Iksan
Development
Period
1970-1971
Designation
Area (1000m )
Rent (W/m )
Gunsan
Daebul
1974-1993
2000-2003
2003-2007
1970.1
1973.10
2000.10
2002.11
954
309
1,254
1,157
Factory: 124
Factory land: 94
Standard: 415-965 Standard: 462-631
Requirements:
Requirements:
Free
Free
Other FI firms: W40 Other FI firms: TBD
No. of firms
78
32
U/ development
U/ development
Foreign firms
47
6
U/ development
U/ development
Type of Business
Electricity
Electronics
Textile
Auto parts,
Machinery
Logistics, Trade,
Manufacture
Source: Administration office of free trade zone
Conditions for free provision: Investment US$10 million for high tech
Investment of US$1 million with at least 30% of foreign investment
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Foreign investment zones. In the case of high tech manufacturing and industry support
services
with foreign investment amounting to US$30 million, it may be designated as a foreign
investment zone, granting most of the benefits granted by Foreign Investment Promotion Act.
Support for foreign investment zones
Rent. The rental for state-owned property within foreign investment zones may be 100%
exempted.
Tax benefits When designated as foreign investment zones, income and corporate tax, if they
are national tax, are exempted for 5 years, and 50% for another 2 years (when no income is
generated for 5 years from the date of business, the period is counted after 5 years). Local tax,
(acquisition, registration, property and integrated land tax) is 100% exempted for 5 years, with
50% exemption for another 3 years, which can be extended up to 15 years maximum.
Other benefits. Support includes development cost within a foreign investment zone, and
infrastructure such as harbor, roads, water supply and electricity, and the foreign-invested
company is not obliged to hire nationally meritorious persons as required by the government’s
labor regulations; and they are exempted from payment of disruption costs during factory
construction, as well as the medical, education and housing benefits.
Designation of Foreign Investment Zones
Investment
(US$1 mil)
Sachun
52
209
Korea GN Taiyo Yuden (Japan)
99.10
Chunan
150
46
Core Film (US)
99.11
Yangsan
6
32
J.S.T (Singapore)
00.03
Yeochun
183
206
Korea BASF (Germany)
00.12
Yeongi
58
70
Korea Auto Glass (Japan)
00.12
Eumsung
45
240
Toshiba (Japan)/Dongbu Elect
01.06
Pyeongtaek
31
158
Dongwoo STI, DW Fiber Film
(Japan)
03.12
Asan
112
923
S-LCD (Japan)
04.05
Total
637
1,884
8 regions
-
Investor
Designated
date
Korea’s Auto Industry - Today and Tomorrow
Area
(1000 Py)
40 I 41
Region
10. Korea’s Economic Trends, Labor and Labor
Unions
Korea’s current economic indices are indicated as follows:
Economic growth: In 2004 economic growth is forecast to be 4.7%, up from 3.1% in 2003,
and the goal in 2005 is set at the 5% level.
[Trends of GDP growth and GNI per capita]
US$
15,000
12
9.5
8.5
7.0
11,176
3.8
4.7
10,841
10,000
8
126,46
11,493
4
10,162
9,438
3.1
0
7,355
-4
-6.9
5,000
97
98
99
2000
2001
2002
GNP per capita
2003
-8
GDP growth rate
Source: Bank of Korea (www.bok.or.kr)
Wage growth: According to KLI, nominal wage growth in 2004 was forecasted to be 7.5+/0.5%, down from 9.2% in 2003.
[Wage growth trends]
1000, person
(Year-on-year, %, Index)
150
12
11.2
130
8.2
116.8
110
10
127.6
8.0
105.1
9.2
10.162
100
6
5.1
90
5.6
5.1
5.5
70
5.6
2000
4
2
1.0
50
8
0
2001
Nominal wage index
2002
Nominal wage hike rate
2003
Real wage hike rate
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Consumer price hikes: The 2005 price hike rate is forecasted to be 2% to 3%, down from
4.9% and 4.1% in 2004 and 2003, respectively.
[Trends of year-on-year consumer prices]
(Year-on-year)
12
12.0
10
11.1
9.0
8
7.5
6.0
6
5.1
3.7
4.9
4.7
3.6
3.6
3.1
2004
2005.1
4
2.7
4.1
2.4
3.0
4.1
2.5
0
0.0
98
99
2
2.3
0.8
2000
2001
2002
2003
Consumer price
Living price
Korea s current labor economy index
Labor productivity. The labor productivity of the manufacturing industry in the fourth quarter
of 2004 rose by 11.6%, while the annual average rate in 2003 marked 8.1%.
[Labor productivity improvement trends-Manufacturing sector]
1000, person
(Year-on-year, %)
110.2
100
100.0
11.7
9.1
8.1
98.6
91.6
6
80.0
60.0
10
2
5.6
99
5.6
2000
-1.4
2001
5.6
5.6
2002
2003
Index
Source: Korea Productivity Center (www.kpe.or.kr)
Climb rate
-2
Korea’s Auto Industry - Today and Tomorrow
14
119.2
42 I 43
120.0
Employment rate New employment in 2005 is estimated at 22,873, up 1.4% from 2004
[Employment trends]
(달러)
24,000
23,000
22,000
(Year-on-year, %)
6.0
4.0
4.3
1.7
20,214
2.8
2.0
22,139
22.169
1.8
22.557
0.0
21.572
-0.1
21.156
21,000
2.0
1.9
-2.0
-4.0
19.938
20,000
20.291
-6.0
-6.0
-8.0
19,000
97
98
99
00
01
02
03
04
Number of employed
%
Source: National Statistical Office
Unemployment rate in 2004 is estimated at 3.5%, up from 3.4% in 2003, and is estimated to
rise to the 5% level in 2005.
[Economic growth vs. Unemployment rate]
13
9.5
8.5
9
7.0
5
4.7
7.0
4.6
6.3
4.1
2.6
3.8
3.4
3.4
3.8
1
3.1
3.1
2002
2003
-3
-6.9
-7
97
98
99
2000
2001
GDP growth rate
2004.3/4
Unemployment rate
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Outlook for Korea’s major economic indices in 2005
As of
MOFE
Growth
(%)
Private
Construction
Facility
Current
Exports
Imports
consumption investment investment income/exp (US$100mil (US$100mil
(%)
(%)
(%)
(US$100 mil)
,%
,%)
04.12.30 5%level
3.2
2.3
3.2
200
- (7.5)
BOK
04.12.9
4.0
1.8
0.5
5.3
160
IMF
05.2.13
4.0
1.7
-
-
-
- (8.7)
OECD
04.11.30
4.5
2.0
-
-
-
- (13.3)
Outlook for 2005
Consumer Unemploym
price (%)
ent
(%, 1000)
- (13.7) Early 3% Mid 3%
2,730(7.3) 2,450(9.1)
3.0
3.6
- (7.5)
3.2
3.6
- (12.8)
3.5
3.5
Note: IMF’s unemployment rate forecast as of 09/24/2004
*Forecast of GNI per capita in 2005: US$16,900 (BOK)
Positive changes in labor-management relations in Korea
Rational relations and cooperation among the labor-management-government have been
taking root. Recently, labor’s understanding and attitude toward the labor movement has been
changed in a positive way. Inside the labor circles, there has been increasing criticism against
their union’s aggressive struggle, with a thought that their movement should be based on
popular support. In line with this movement, the businesses, in an effort to remove the distrust
and establish healthy relations based on mutual trust, declared their commitment to transparent
and ethical business operations. Businesses involved include Shinsegye, Kookmin Bank,
Samsung Insurance, POSCO, Samsung SDI, Dongbu Steel, Hankuk Electric Glass, Yuhan
Kimberly, and LG Philips LCD etc.)
Stabilized wages. Wages have been stabilized downward, with a narrowing gap between the
jobs. The average wage raise, as a result of negotiation (based on gross), was 5.5% , down
1.2% from a year ago, sustaining the downward trend.
(Wage hike trends: 6.7% in ‘02 6.4% in ‘03 5.2% in ‘04)
44 I 45
Law-abiding practices are becoming more apparent. Illegal practices in the course of
negotiation are disappearing rapidly, with fewer numbers of people arrested. The tense relations
between the labor and management have been eased.
(Number of people taken into custody : 221 in ‘01 200 in ‘02 165 in ‘03 71 in ‘04)
Korea’s Auto Industry - Today and Tomorrow
A more rational labor-management negotiation process has been increasingly expanded.
Early settlement of disputes based on dialogue and compromise has been taking root, against
the background of negative public sentiment against the illegal strikes and the economic
downturn. Thanks to such efforts, the loss of working days has been on the decline for three
consecutive years (Loss of working days: 1,580 days in ‘02 1,299 in ‘03 1,199 in ‘04)
Cooperative labor-management relations. Cooperation has improved in wage stabilization,
productivity enhancement, with higher accomplishments and welfare levels increasing. A
“Wage Peak” system granting a certain period of employment with wages gradually declining
from a certain age level has been extended to the media and public enterprises.
(The companies adopting the “Wage Peak” system include Korea Credit Guarantee Fund,
EXIM Bank, MBC, KOWACO, Korea Container Terminal Authority, Daehan Electric Wire
and Daewoo Shipbuilding & Marine Engineering)
Korea’s Auto Industry - Today and Tomorrow
Offering Investors a Future-Oriented Optimal Investment Environment
Twenty-three companies including Delphi Corp., Robert Bosch GmbH, Visteon Corp.,
Denso Corp., Lear Corp, Johnson Controls Inc., Faurecia, TRW Inc., Valeo SA, Siemens,
Dana, Continental AG, which are among the world’s 30 top-ranking parts suppliers
recording the largest sales, have already established a presence in Korea, strong proof
of Korea’s viability as an investment destination for the parts industry.
Exaggerations re. labor-management relations in Korea. Korea’s labor-management
relations were somewhat exaggerated and perceived as very confrontational. In fact, severe
confrontations were limited to a few specific workplaces. (20 to 30 workplaces)
-Of the total 6,500 unions, with participation rates of 12%, the unions actually involved in
strikes totaled a mere 300, or 5% annually.
-No unions are organized in the majority of workplaces, and existing unions maintain
cooperative relations with the management, settling the issues based on dialogue and
compromise.
-JP Morgan, in its report titled “Labor strikes in Korea - myth and reality”, pointed out that the
strikes happening in Korea were exaggerated by the media, and the impact on the stock market
and GDP was insignificant. (June 25, 2003)
-The IMF said in its annual report that the government’s stance in refraining from intervening
in labor-management conflicts has successfully been taking root recently. Though the number
of disputes has slightly increased, they were settled in a timely manner, without becoming a
hindrance to the nation’s economy. Wage hike rates stayed low, considering the economic
downturn.
Labor participation rates comparing with those of other advanced nations
Compared with other advanced nations Korea recorded a relatively low rate of participation in
strikes (based on 2002 and 2003 statistics) - UK 29%, Germany 22.3%, Japan 19.6%,
Singapore 19.3% and the United States 12.9%. The violent image of Korean unions appeared
to result from media images highlighting the actions of a few aggressive unions.
'87
USA
UK
Germany
France
Australia
Japan
Korea
Singapore
Taiwan
'88
'89
'90
17.0 16.8 16.4 16.1
46.9 45.9 44.4 38.0
38.9 38.7 38.4 37.5
9.8
41.2 - 41.0
27.6 `6.8 25.9 25.2
18.5 19.5 19.8 18.4
20.5 19.9 19.5 16.3
35.0 40.2 38.1 43.3
'91
'92
'93
'94
'95
'96
'97
'98
'99
'00
'86
'01
'02
16.1
37.0
41.6
24.5
17.2
16.4
48.0
15.8
36.0
40.1
40.0
24.4
16.4
16.8
48.1
15.8
35.0
38.4
24.2
15.6
17.1
44.5
15.5
33.0
37.2
35.0
24.1
14.5
16.4
48.9
14.9
32.1
36.0
9.1
33.0
23.8
13.8
15.7
46.6
14.5
35.3
31.0
23.2
13.3
17.1
44.6
14.1
27.3
28.2
30.3
22.6
12.2
14.2
42.2
13.9
26.9
27.1
28.1
22.4
12.6
14.6
41.1
13.9
27.0
26.1
25.7
22.2
11.9
15.4
40.0
13.5
29.5
22.4
24.7
21.5
12.0
15.0
38.5
17.5
48.7
39.3
45.1
28.2
16.8
20.7
34.5
13.4
29.1
22.7
8.0
24.5
20.7
12.0
16.5
39.4
13.2 12.9
29.0
22.3
8.0
23.1
20.2 19.6
11.0 11.0
19.3
38.4
‘03