Hyundai and Kia will increase cash payments to suppliers to help them cope with the steep rise in the value of the won and high oil prices.
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The companies have said in a statement that they will pay fully in cash to their smaller parts manufacturers and cut the deferred payment period to 60 days from the current 120 days for bigger suppliers, according to the Korea Herald .
The cash payments will be made to about 1,800 suppliers for the rest of this year and are estimated at 3.3 trillion won ($US3.5bn).
According to the newspaper, the move is also seen as an attempt to regain public confidence with its executives, including Hyundai Automotive Group chairman Chung Mong-koo, being investigated for corruption.
Chairman Chung was questioned for 15 hours this week over the illegal accumulation of slush funds that were allegedly used to bribe government officials. It is still possible that Chung will be arrested.
Last weekend, suppliers to Hyundai and Kia filed a petition to the Supreme Public Prosecutors’ Office, calling for authorities to consider the negative impact of the widening investigation on smaller companies.
Korea’s major business lobbying groups and agencies including the Federation of Korean Industries, the Korea Chamber of Commerce and Industry and the Korea Employers Federation have also submitted a petition to the prosecution. They have reportedly asked the prosecutors to consider Chung’s roles in advancing the automotive industry.
So far the investigation has led to the arrest of three people and travel bans on 10 executives, including Chung and his son, Eui-sun, chairman of Kia Motor.
