Hyundai to share costs of subcontractors
SME Minister Hong Jong-haak, center, holds a memorandum of understanding with Hyundai Motor President Chung Jin-haeng, left, and Corporate Partnership Foundation Secretary General Kim Hyung-ho at the foundation’s office in Seoul, Tuesday. Hyundai will raise funds to share labor costs with its subcontractors. / Yonhap
By Park Jae-hyuk
Hyundai Motor Group will donate 50 billion won ($46 million) in the first half of this year to support its small- and medium-sized auto-parts suppliers that have faced financial difficulties over the recent minimum wage hike.
The conglomerate will also raise 100 billion won to offer low-interest loans to its subcontractors.
For the financial support, the automotive group said it has signed a trilateral memorandum of understanding Tuesday with the Ministry of SMEs and Startups and the Corporate Partnership Foundation at the foundation’s office in Seoul.
The signing ceremony was attended by SMEs Minister Hong Jong-haak, Hyundai Motor President Chung Jin-haeng and Kim Hyung-ho, the secretary general of the foundation.
“An innovation through partnership between big and small companies is the only way for Korea to overcome the slow economic growth and polarization of wealth,” the minister said. “I hope Hyundai’s efforts prompt more companies to cooperate with their subcontractors.”
Kim also regarded the cooperation as a good opportunity to encourage corporate partnerships between SMEs and conglomerates, saying he wants the government and large companies to continue to support the country’s SMEs.
According to Hyundai, the agreement is a part of five strategies for win-win growth which was announced last year.
Back then, it promised to improve management of its 5,000 subcontractors, enhance their competitiveness, help their overseas expansions, support their employment and boost ties among them.
The 150 billion won in funds will be raised for improvement in the subcontractors’ business management. Hyundai plans to come up with specific measures for the other win-win strategies as soon as possible.
“We have tried our best for the continuous growth of our suppliers and cooperation with them, because we think win-win growth is essential for the quality of our vehicles,” a Hyundai Motor Group official said. “We will continue to support our subcontractors, so they are globally competitive.”
The official said the company will continue to make efforts for win-win growth to take root in the nation’s automotive industry.
Hyundai’s move is in line with the government’s view on the minimum wage hike.
Fair Trade Commission Chairman Kim Sang-jo said conglomerates should share the increased costs resulting from the recent hike in the minimum wage, during a meeting with franchisers last week.
“It could be one option to minimize any fallout from the minimum wage hike,” he said. “Co-prosperity and cooperation are most vital for the franchise industry.”
The minimum wage rose by 16 percent to 7,530 won this year. The Moon Jae-in administration has pledged to raise the minimum wage to 10,000 won before the President’s term ends in 2022.
Finance Minister Kim Dong-yeon has also urged the nation’s conglomerates to support their subcontractors.
Against this backdrop, Samsung Electronics has reportedly decided to reflect this year’s wage hike in business deals with its suppliers in an effort to share the increased financial burden.
According to industry officials, LG and SK are also considering various measures to support their subcontractors.