No Factory Construction for 25 Years
South Korean automakers have built no factory at all in South Korea since February 1997, when Daewoo built its plant in Gunsan to manufacture 300,000 vehicles a year, according to industry sources on December 25. The plant of Daewoo that manufactured the Nubira sedan had an automation rate of 97% in its vehicle body welding lines and 100% in its press facilities. Likewise, the Hyundai Motor Group built its last manufacturing facilities in South Korea in Asan in 1996.
Experts point out that this is because of militant labor unions’ frequent strikes, high costs and low productivity and that the situation is leading to a higher rate of unemployment and crises in various industries with the Hyundai Motor Group’s profitability on the decline.
The group’s domestic-to-overall production ratio dipped below 50% in 2010 and fell from 48.1% to 37.6% between that year and November this year. Seoul National University sociology professor Song Ho-keun recently said that the group may have to worry about survival within 10 years and the crisis is not going to be limited to the group then.
During the past 20 years, Japan succeeded in increasing the volume of domestic automobile production by means of corporate tax cuts, special district designation, etc. On the contrary, South Korean automakers reduced their domestic automobile production volume during the same period. “The number of jobs in the domestic automobile industry has continued to decrease since Ssangyong Motor conducted a large-scale layoff back in 2009 and Renault Samsung Motors laid off 30% of its employees in 2012,” said an industry insider, adding, “In spite of the following improvement of conditions, Renault Samsung Motors has failed to increase its capacity in South Korea due to the lack of labor flexibility in the country.”
Meanwhile, Japanese automakers are returning to their home country one after another amid a weak yen. For example, Honda is planning to relocate its Super Cub manufacturing facilities from China to Kumamoto next year. Last year, Toyota relocated some of its Camry and Lexus manufacturing facilities from the United States and Canada to Japan. Nissan recently raised its domestic production ratio as well. Many other Japanese carmakers are planning to follow suit to benefit from the current weak yen and the Japanese government’s measures such as corporate tax cuts and regulatory reform.