Support for Small-sized Parts Suppliers
The Hyundai Motor Group, owner of South Korea’s two largest automakers Hyundai Motor Co. and Kia Motors Corp., has decided to invest 1.7 trillion won (US$1.51 billion) over the next five years to support small and mid-sized auto parts suppliers which suffer from financial difficulties. The group will provide smaller firms with investment costs injected into component production in advance to help them resolve pressing financial problems and offer practical help to strengthen their competitiveness such as technology development and smart factory establishment.
The Hyundai Motor Group announced its mutual cooperation project worth 1.67 trillion won (US$1.49 billion) on Dec. 13 to stabilize management of car component producers, develop environmentally friendly and future car parts and strengthen the mutual growth ecosystem of first-tier to third-tier suppliers.
The business group will newly create a 140 billion won (US$124.44 million) worth of future growth fund. Currently, it operates a total of 455 billion won (US$404.44 million) worth of funds, including 103.5 billion won (US$92 million) of mutual growth fund to make payment in cash to existing suppliers and 50 billion won (US$44.44 million) of mutual growth operation capital fund. Combining the new future growth fund, Hyundai Motor Group will operate 595 billion won (US$528.89 million) worth of funds in total to provide funding support to stabilize management of its suppliers.
It will also introduce the system to provide early payment of part of funds that have been used in component research and development and parts mass production to its component suppliers. With the early payment of investment costs, auto parts suppliers are expected to benefit 1.46 trillion won (US$1.29 billion) for five years starting from next year, according to Hyundai Motor Group. In addition, Hyundai Motor, Kia Motors and Hyundai Mobis Co. are planning to raise 15 billion won (US$13.33 million) of funds to provide emergency funds to help small and mid-size component suppliers stabilize their management.
The group has also come up with plans to help smaller auto parts suppliers secure product competitiveness. This is largely due to the auto industry’s transition from traditional internal combustion engines to eco-friendly vehicles, including electric vehicles. Hyundai Motor Group has presented the concrete action plans for three competitiveness improvement projects for its component suppliers, such as training, technology and joint development.
Especially, the group has decided to provide up to 44 billion won (US$39.11 million) to its suppliers expanding investment in facility for hydrogen cars in line with the increase of the Nexo hydrogen fuel cell SUV next year. In fact, Hyundai Motor Executive Vice Chairman Chung Eui-sun announced “FCEV Vision 2030,” a medium and long-term roadmap for hydrogen and hydrogen fuel cell vehicles, on the 11th, and pledged to increase the production of the group’s hydrogen powered cars to 500,000 and make a 7.6 trillion won (US$6.76 billion) investment by 2030.
The Hyundai Motor Group will also support the establishment of information technology (IT) and software-based smart factories for 800 second and third-tier small and mid-size suppliers for three years starting from next year as well as export marketing campaigns. A total of 240 companies, 80 a year, will be supported. An official from the group said, “We will make sure that they will be practical support that small and mid-size component suppliers can feel.”