Automobile Industry “Gloomy June”

A gloomy picture is being presented for the nation`s automobile industry in June, 2003. Despite some aggressive marketing strategies this year, domestic automobile sales have kept declining while labor unions of the industry come forward to assist the Korean Confederation of Trade Unions` plan to launch a general strike this summer.

The industry sources reported on June 25th that domestic automobile sales for this month dropped by 1.3 percent to 47,008 from 47,616 in the previous month.

The sales figure stood at 125,608 in January, 119,311 in February and slightly recovered to 130,969. But it began to downslide to 129,709 in April and 119,509 in May. Especially, the figure for May is a drop of 26 percent compared to the same period last year.

In the meantime, labor unions of three major automobile corporations – Hyundai Motors, Kia Motors and Ssangyong Motors- participated in a temporary strike led by the KCTU on June 25th. The number of their union members who joined the strike was 52,000, almost half of the total participants in the strike. The labor union of GM Daewoo which was sold to General Motors last year did not take part in the strike, even though it was also a member of the KCTU.

Hyundai Motors told on June 20th that some 4500 units of automobiles worth of some 60 billion dollars were unable to be rolled out due to the partial strikes on 20th and 21st, and some 2700 units of automobiles worth of 37 billion won were lost on 25th. Kia Motors also suffered a loss of 12 billion won worth of productions for some 850 units while Ssangyong lost 3.2 billion won worth of production for 160 units. Aggregate amount of losses by the three companies will reach as much as 118.2 billion won.

Against this worrisome backdrop, automobile exports are being hindered by these partial strikes. An official from Hyundai Motors said, “So far, we have been able to balance our business with exports. But if the strikes enter a serious phase, exports will also suffer due to shortage of products while losing our international credibility.” This means that there are domestic inventories but they would not be used for export because specifications of products for domestic sales and for export are different.

In case of Hyundai and Kia Motors, they hold some inventories for 30 and 20 days, respectively, due to low domestic sales. However, if the strikes go longer, they will affect domestic sales, too.

Jong sik Kong kong@donga.com