KOREANAUTOMOTIVEPARTSINDUSTRYMarch28,2002PreparedbyJamesR.McElroyAutomotivePartsandSuppliersDivision,OfficeofAutomotiveAffairsTABLEOFCONTENTSPageExecutiveSummary1HistoryofIndustry3StructureofKoreanPartsIndustry5RestructuringofKoreanPartsIndustry8U.S.InvestmentinKoreanPartsIndustry12Non-U.S.InvestmentinKorea13KoreanInvestmentinUnitedStates14TradeinAutomotiveParts14Aftermarket20Observations23AppendixA:SummaryofRestructuringofKoreanPartsIndustry24AppendixB:KeyContactsfortheKoreanPartsIndustry25AppendixC:KoreaAutoIndustriesCooperationAssociation291KOREANAUTOMOTIVEPARTSINDUSTRYExecutiveSummaryThedevelopmentofacountry’sautomotivepartsindustrynormallyfollowsthedevelopmentofthevehicleindustry,andKoreaisnoexception.ThebeginningoftheautomotiveindustryinKoreaconsistedofassemblyofknocked-downunitsimportedfromJapan.Lateron,theprimaryKoreanvehiclemanufacturersbeganimportingpartsmainlyfromJapanforassembly.Next,apartsindustrydevelopedconsistingmainlyofsubsidiariesofthemotorvehiclemanufacturers.Finally,anindependentpartsindustrywasestablished.Asintheothermajorautoproducingcountries,Koreanvehicleassemblersareincreasinglyrelyingonindependentfirsttiersuppliersformostoftheirpartsandhavedivestedmanyoftheirpartsproducingsubsidiaries.KoreafollowedtheJapaneseGovernmentmodelforthevehicleindustry,firsttryingtocontrolthedevelopmentoftheautomotiveindustryeitherdirectlyorindirectly,butthenallowingtheindustrytofunctionalmostentirelyonitsownwithlittlegovernmentinterference(atleastonthemanufacturingside).Initially,therewasonlyonecompanyallowedtomanufactureautosandonetomanufacturetrucksandbuses.Duringtheearly1990's,therewerefiveproducersofvehicles.TherearecurrentlyfourKoreanproducersofvehicles;however,onlyone(Hyundai)isaworldwidecompetitor,whiletheotherthreearerelativelyweak.FewvehicleshavebeenimportedintoKoreaduetodirectorindirectgovernmentintervention.TheKoreanpartsindustryatonetimeconsistedoftwoverylargemanufacturers,bothsubsidiariesoftheassemblers,orcompaniescontrolledbythevehicleassemblers.Nowmajorpartsofthesesubsidiarieshavebeensold,mergedwithforeignpartners,orgoneoutofbusiness.Themostcompetitiveindependentsuppliershavesurvived,andtheweakercompanieshavebecomesecondorthirdtiersuppliersorceasedmakingparts.Thesizeofthepartsindustryinmostcountriesisdirectlyrelatedtovehicleproduction.Koreafirstproduced120,000vehiclesdomesticallyin1980,andby2001itsproductionsurpassed3,000,000vehicles.Duringthe1998-2001period,Koreaexportedoverhalfofitsdomesticvehicleproduction,whileimportingveryfewautosandtrucks.ThenumberofKoreanpartscompaniesdeclinedfrom1,339in1997to1,109in1999,andisexpectedtodropbelow1,000by2002.Only32partscompaniesemployedmorethan1,000employeesin1999,while703partscompanieshadfewerthan100workers.KoreaDelphi(majority-ownedbyU.S.DelphiAutomotiveSystems)isthelargestindependentpartscompanyinKorea.FifteenotherpartscompaniesarewhollyownedbyU.S.companies.BothEuropeanandJapanesefirmshavealsoinvestedheavilyinproducingpartsinKoreanplants.However,thereisvirtuallynoKoreanautoparts2investmentintheUnitedStatesorEU.Korea’sexportsofpartsincreasedfrom$495millionin1990to$1.5billionin2000.AlmosthalfofKorea’sexportsweretotheUnitedStatesandCanadain2000.Theprincipalproductsexportedwereairconditionercompressorsandparts,bearings,wheels,windowregulators,steeringparts,andclutchesandpartsofclutches.Koreaimportedanestimatedtot...
