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FTC head warns auto industry of concentration

Anti-trust czar makes a comparison to shipbuilding industry
June 04,2019
The head of the Fair Trade Commission warned that Korea’s auto industry could enter a downward spiral like the shipbuilding industry unless it overhauls its structure.

During a visit to Kia Motors’ factory in the southwestern city of Gwangju on Monday, Fair Trade Commission Chairman Kim Sang-jo urged the country’s automakers to strengthen cooperation with suppliers and compared them to the crisis-plagued shipbuilding industry.

“The auto industry, like the shipbuilding industry, has a value chain in which the major automakers sit on top […] the value chain is difficult to rebuild once toppled over,” cautioned Kim.

He said the shipbuilding industry was overly focused on large companies that didn’t cooperate with smaller companies in the industry.

The warning came as auto manufacturing has slowed in recent years as competition grew in the global market.

According to the Korea Automobile Manufacturers Association (KAMA), 4.03 million cars were manufactured last year, a 2.1-percent drop from the previous year. The number of cars exported fell 3.2 percent over the same period.

GM Korea shut down a factory in Gunsan, North Jeolla in May 2018 amid management woes.

Kim advised the industry to focus on increasing competitiveness from parts suppliers.

“In order for the current auto industry to avoid the path that the shipbuilding industry took in the past, auto manufacturers should strengthen efforts to increase competitiveness from its suppliers such as increasing productivity and supporting measures for future vehicles,” suggested Kim.

The FTC chief also expressed support for Hyundai Motor Group’s Gwangju job plan that works with a regional government to create more jobs.

Under an agreement reached earlier this year, the automaker will open a factory in Gwangju that pays relatively low wages in return for job creation in the city. The city of Gwangju is a partner in the venture.

“I request the Hyundai Motor Group as part of its future vehicle business plans […] to take interest in the government’s cooperative regional job plan to create more jobs,” said Kim.

The FTC chief also hailed the auto group’s plans to focus on new car types such as fuel-cell electric vehicles (FCEV).

The automaker announced late last year that it will invest 7.6 trillion won ($6.4 billion) in FCEVs to build a capacity of 500,000 units by 2030.

The government is hoping to increase the share of eco-friendly cars it makes to over 10 percent from the current 1.5 percent.

BY CHAE YUN-HWAN [chae.yunhwan@joongang.co.kr]