This research is an attempt to understand the limitations and issues of the company development strategies of auto part manufacturers by identifying the responses of auto part manufacturers, the condition of supply and management of auto part manufacturers, and the changes in the subcontracting strategies of automobile manufacturers.
Auto part manufacturers have grown alongside the automobile industry in South Korea, as the country experienced rapid economic development in the 1980s through export industries. Auto part manufacturers also developed through a form of vertical integration with their parent companies, automobile manufacturers, by sharing business, production, and information management. Also important was the segmentation of the production process, specialization, intensive production, improvement of equipment utilization efficiency, and operation of its own machines and facilities.
Since the late 1980s, automobile manufacturers have developed a flexible factory automation production system, which has made batch production possible. Through this method carmakers have developed unique unit models. As the development of automobile parts—the initial step required to develop new types of cars—became accessible, auto part manufacturers were required to be capable of developing products and designs.
Company H provided specific plans for the development of auto part manufacturers, and improved its capability, necessary for segmentation of the evaluation of auto part manufacturers. Moreover, Company H financially supports auto part manufacturers through methods which include operating funds such as short-term prepayments, order deposits, and intermediate payments. Company H also supports molding costs, selling production and design equipment such as devices and molds, and provides bank guarantees so that automobile manufacturers can indirectly support auto part manufacturers through bank loans. As of 1989, Company H provided KRW 25.363billion, and their support increased to KRW 72.393billion in 1992.
Despite the wage gap between car manufacturers and auto part manufacturers, productivity of auto part manufacturers shows improvement based on its labor-intensive products and items. This figure demonstrates that when automobile manufacturers support auto part manufacturers for the purpose of improving product technology, efficiency increases. For future development, Company H is strengthening relationships between its partners in order to improve information exchange. Through increased training support, Company H helps partner companies to initiate chief executive seminars and provide skill training. Company H is active in supporting partner companies, but total support remains insufficient.
Since 1984, “Company H” has determined whether or not to reduce benefits or to take sanctions against its partners via a proprietary rating assessment system. The rating system evaluates 97 items including management, technological development, production management, quality control, A/S, et cetera. However, if a company scores less than 60 points (out of a possible 100), Company H discontinues its cooperation. In addition, there are restrictions for partners when developing new products. As of October, 1993, 19 companies out of 251 have scored less than 60 points. In order to manage with Company H’s assessment, Company H’s partners are focusing on developing their technology through investment research and development, seeking technical cooperation with international companies, transferring technology, and creating exclusive product technology.
Until now, automakers are expected to make an attempt to expand its industry with the purpose of specialization, enlargement and systematization. However, if the industry succeeds in extending its business boundaries, it might be dangerous to exclude the possibility of the vertical integration system from collapsing, but we should also be prepared for the fundamental changes in the relationship between automobile manufacturers and auto part manufacturers.
한국 완성차업체의 부품업체 육성전략과 부품업체의 대응 (The responses of auto part manufacturers and development strategies of auto part manufacturers initiated by automobile manufacturers)
H사의 사례를 중심으로 (Based on H's case)
|Series Title; No||정책연구시리즈 / 94-26|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Manufacturing|
|Holding||KDI; KDI School|