Mergers
MERGER AND RECONFIGURING
OF HYUNDAI-KIA
Byoung-Hoon LEE, Sung-Jae CHO
The Korean auto industry continued to grow without a slump from the early 1980s to the mid of 1990s. As illustrated in <Figure 1>, the auto industry in Korea had shown a sustained growth in sales of domestic and overseas markets until 1996. Between 1981 and
1996, it recorded a notably high rate of averaged annual growth in production (22.7%), domestic sales (19.5%), and export (36.2%). However, it experienced an unprecedented downturn under a serious economic slump and the foreign currency crisis occurring in the period of 1997-1998. In this period, all the automakers but Hyundai reached serious financial crisis, which mainly resulted from their over-expansion of production facilities by relying on an exorbitant amount of debts and was partly caused by excessive domestic market competition among them (Lee 2001; Cho 1999; Yoon et al. 1998). Kia went bankrupt in the summer of 1997, whereas Samsung, Ssangyong, and Daewoo fell into an insolvency crisis in
1999.
Figure 1.- Trends of Auto Sales by Korean Automakers
Export
Domestic
0
500
1000
1500
2000
2500
3000
3500
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
(Thousands)
(Source): Korea Automotive Research Institute (2000a)
2
In this context, the Korean auto industry has been experiencing the process of wholesale reconfiguring up to now. Kia and its affiliate, Asia Motor, merged into Hyundai, and Samsung was acquired by Renault, a French automaker. Both Daewoo and Ssangyong are now under the control of creditor banks and the government, which provided public loans for their continuing operation, and it is not yet determined whether to sell out the ownership of the two companies, or to restore these crippled auto makers on their own. Even Hyundai, which maintained relatively healthy financial performance, made a sudden reshuffle of top management in accordance with the Hyundai group owner’s succession
OF HYUNDAI-KIA
Byoung-Hoon LEE, Sung-Jae CHO
The Korean auto industry continued to grow without a slump from the early 1980s to the mid of 1990s. As illustrated in <Figure 1>, the auto industry in Korea had shown a sustained growth in sales of domestic and overseas markets until 1996. Between 1981 and
1996, it recorded a notably high rate of averaged annual growth in production (22.7%), domestic sales (19.5%), and export (36.2%). However, it experienced an unprecedented downturn under a serious economic slump and the foreign currency crisis occurring in the period of 1997-1998. In this period, all the automakers but Hyundai reached serious financial crisis, which mainly resulted from their over-expansion of production facilities by relying on an exorbitant amount of debts and was partly caused by excessive domestic market competition among them (Lee 2001; Cho 1999; Yoon et al. 1998). Kia went bankrupt in the summer of 1997, whereas Samsung, Ssangyong, and Daewoo fell into an insolvency crisis in
1999.
Figure 1.- Trends of Auto Sales by Korean Automakers
Export
Domestic
0
500
1000
1500
2000
2500
3000
3500
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
(Thousands)
(Source): Korea Automotive Research Institute (2000a)
2
In this context, the Korean auto industry has been experiencing the process of wholesale reconfiguring up to now. Kia and its affiliate, Asia Motor, merged into Hyundai, and Samsung was acquired by Renault, a French automaker. Both Daewoo and Ssangyong are now under the control of creditor banks and the government, which provided public loans for their continuing operation, and it is not yet determined whether to sell out the ownership of the two companies, or to restore these crippled auto makers on their own. Even Hyundai, which maintained relatively healthy financial performance, made a sudden reshuffle of top management in accordance with the Hyundai group owner’s succession
Bibliography: the Synchronization of Production”, 2001. (Unpublished Paper in Korean) Cho, Sung-Jae, “Bankruptcy and Revival of Kia Motor: an Analysis of Recent Evolution”, Automotive Economy, Vol. 271, 2001, pp. 4-12. (In Korean) Cho, Sung-Jae, “Corporate Governance and Labor Relations: the Case of Kia Motor”, Ph.D. Dissertation of Economics Department, Seoul National University, 2000a. (In Korean) Cho, Sung-Jae, “The Background and Meaning of Strategic Alliance between Hyundai Motor and Daimler-Chrysler”, Automotive Economy, Vol. 257, 2000b, pp. 4-12. (In Korean) Cho, Sung-Jae, “The Crisis Factor and Restructuring of the Korean Auto Industry”, Paper presented to the Symposium of the Korean Association of Social Economics, 1999. (In Korean) Fujimoto, Takahiro, “Global Alliances, Mergers, and Their Implications for the Korean Auto Industry”, Mimeo, 1999. Ha, Boo-Yung, “The Prospect of the Automobile Industry and the Union’s Countermeasures”, Training Manual of the Hyundai Motor Workers Union, 2000 Hyundai Motor Workers Union, Report of the Labor-Management Joint Committee for the Improvement of Shift Schemes and Man-hour Allocation, 2000 Vol. 6, No. 1, 2000, pp. 27-58. (in Korean) Kia Motor Workers Union, Proposal of Union’s Demands For Labor Contract and Wage Increases With a Report of Union Members Survey Analysis, 2000 & 1996. (In Korean) presented to the Annual Conference of the Korean International Trade Academic Association, 2000 Kochan, Thomas, Russell Lansbury, John Paul MacDuffie (eds.), After Lean Production: Evolving Employment Practices in the World Auto Industry, Ithaca, ILR Press, 1997. Korea Automobile Manufacturers Association, Korean Automobile Industry, 2000. (In Korean) By AMANULLAH BASHAR Nov 08 - 14, 1999