LG Electronics vows to better help suppliers

By Kim Yoo-chul

LG Electronics is considering more ways to improve its support for its suppliers, subcontractors and other smaller business partners, by offering them more generously-constructed deals and also technological support.

The Korean technology giant, among the world's leading makers of flat-screen televisions and mobile phones, said Sunday it will double the number of its employees dispatched to about 1,300 of its most important suppliers over the next two years to improve interaction and collaborative business activities.

The plans, announced by LG Electronics chief executive Nam Yong, also promise various incentives for suppliers in improving productivity and quality and reducing inventory.

The LG Group of companies recently said that it will spend 740 billion won (about $625 million) to help its smaller business partners this year, including the creation of a 250 billion won mutual development fund.

It hasn't been determined how the fund will be divided across the key LG affiliates, including LG Electronics, for management.

In a public relations (PR) gesture, Nam visited Samcheon Industrial, a key LG Electronics supplier in Changwon, South Gyeongsang Province, last week, and discussed how his company could improve its partnership with small- and medium-sized enterprises.

"LG Electronics' global competitiveness heavily relies on the edge provided by our key suppliers. LG will regularly check the development phases of our suppliers and keep them on course for development," Nam was quoted as saying.

Samcheon, which provides parts for LG Electronics' washers, saw its productivity improve by 30 percent, product quality by 50 percent and a cut in inventory by 30 percent thanks to the technological and managerial support by LG Electronics, according to an LG press release.

LG Electronics will expand the number of its technology and management consultants to 50, from the current 30, for the Changwaon area by the end of the year. The consultants are currently covering 48 of LG Electronics' suppliers in the Changwon area, LG Electronics said.

"The idea is to expand our coverage to 350 suppliers," said G.W. Kim, a senior LG Electronics spokesman.

LG Electronics is also planning to make it a rule to pay in cash when purchasing components from its key suppliers, Kim added.

LG and other Korean conglomerates have been scrambling to announce packages designed to better support their suppliers and small- and medium-sized enterprises after President Lee Myung-bak recently criticized them for the supposedly casual interest in helping smaller companies and creating new jobs.

Samsung Electronics had said it will set up a 100 billion won fund with the contribution of 80 billion won from the Industrial Bank of Korea (IBK) to help its thousands of suppliers benefit in receiving low-interest rates for R&D and management from October.