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[Editorial] Lessons for automakers

In auto production, it only takes a shortage of one small part to bring the whole assembly line to a screeching halt. This was well demonstrated by the week-long strike at Yoosung Enterprise Co., a manufacturer of key engine parts.

The company is the larger of the two piston ring producers in Korea. It meets 70 percent of the demand of Hyundai Motor and Kia Motors and 20 to 50 percent of the demand from three other automakers ― GM Korea, Renault-Samsung Motors and Ssangyong Motor.

As such, Yoosung’s strike, which started on May 18, threatened to paralyze the entire automotive industry in Korea. Had the walkout continued until the end of May, the five automakers would have suffered a combined output loss of 50,000 vehicles worth 850 billion won.

So it was inevitable that the government would mobilize riot police Tuesday to break up the illegal occupation of the company’s plant in Asan, South Chungcheong Province, by some 600 striking workers. They staged a sit-in demanding improved working conditions and wage hikes.

It was fortunate that the strike was brought to an end early and without damage to the plant. A prompt resumption of the plant’s operation not only saves Yoosung from bankruptcy but helps the five automakers and some 5,000 other auto parts suppliers avert a prolonged stoppage of production lines.

But the incident exposed serious weaknesses in the supply chain of domestic automakers, especially Hyundai and Kia. By relying too heavily on a single supplier for an important part, the two firms have made themselves vulnerable.

But procuring a part from multiple vendors is not an easy option to take because it increases costs and makes quality control difficult. Hyundai and Kia will have to think about ways to address this problem.

They also need to provide more breathing room to their suppliers by improving the terms of the contract. This will go a long way toward preventing operational disruptions at their subcontractors. They need to take better care of their vendors.
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Korea Herald daum