Hyundai Motor and Kia Motors are being investigated by a Korean government agency for applying pressure on parts suppliers to lower prices.
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The Korea Times said the Fair Trade Commission (FTC)’s investigations into Hyundai’s strong-arm tactics came together with news that the automaker’s chairman Chung Mong-koo is expected to reap more than 30 billion won in year-end dividend income, making him the top earner among the leaders of Korea’s 10 largest conglomerates for three years in a row.
An FTC official told the Korea Times the regulator is checking if Hyundai and Kia have abused their dominant power in their planned reduction of parts costs.
The paper said the anti-trust regulator’s action came as the automakers claimed that it would reduce costs for auto parts, citing the dollar’s slide against the won and high oil prices.
Subcontractors reportedly reacted angrily, saying that they are also affected by the unfavourable exchange rate. One Hyundai subcontractor told the paper that the contractor is transferring losses to subcontracting companies that are in a worse position to take the blow.
Hyundai-Kia Automotive Group officials retorted that the allegations that the group is forcing about 3,000 subcontractors to cut prices is misinformation, saying that the cost reduction would be achieved by negotiation, not pressure.
In its report on the 2006 main policies to the National Assembly yesterday, FTC Chairman Kang Chul-kyu reportedly said the regulator will secure fair trading terms between conglomerates and small- and mid-sized enterprises (SMEs).
Though the FTC said the intensive probe into the car makers would have been possible based solely on apparent damages or complaints from parts suppliers, it had already launched an investigation into domestic car makers late last year, the paper noted, adding that the FTC probe is likely to focus on Hyundai and Kia when the cost reduction plan is unveiled.
