| La Lettre du GERPISA | no 120 (february 1998) |
Using the GERPISA newsletter as a forum for expressing hypotheses onthe future of Korean automobile firms is risky business, especially considering that the situation in Southeast Asia, and more particularlyin South Korea, is evolving rapidly. Hence, it is useful to recall a few specific points. The automobile industry has attracted chaebols, demonstrated by recent Samsung efforts to integrate this sector. A certain number of its conglomerates, such as Hyundaï, Kia and Daewoo have already acquired an important position: according to CCFA figures for 1996, production on Korean territory reached, respectively, 1 million, 460,000, and 440,000 cars. Also in 1996, national production reached 2.1 million cars, placing Korea in fifth place worldwide.
This impressive position was attained thanks to the following conditions. The state played a very important role by narrowly structuring industrial firms (particularly conglomerates up to 1980), aswell as financial systems (up until recently). It influenced industrialchoices and the distribution of activity among industrial groups in exchange for financial means which were as generous as they were difficult to define. The policy of substituting imports, resembling as such Japan's 1950s policy, must nevertheless be distinguished from that adopted by other emerging countries such as in Latin America. As was the case for its neighbor, this policy was prolonged by an export policy. In both phases, economies of scale were and have remained the essential objective. However, Korean automobile constructors carried out these successive policies within a growth environment in order to anticipate results, the Korean specificity residing, perhaps, in the distance it had, when compared to Japan, from a less favorable international economic situation.
The strong nationalist element which inspired these orientations attributed a certain legitimacy to the dictators. However, it did not prevent the development of an important union protest movement, perhaps the most powerful one in all of Southeast Asia. These two factors undoubtedly constituted the basis of forecoming change which had to be dealt with by national and international institutions.
Changes underway raise a number of questions. From a macroeconomic standpoint, evolution in exchanges will prove to be a significant domain. The protectionist trend will perhaps be broken down by foreign pressure. However, apart from nationalist sentiment, one must not forget that the Korean trade balance has traditionally been a debit one, despite commercial aggressiveness on the part of certain firms. This commercial deficit is a major handicap in efforts to turn the country's economy around. Devaluating the won runs the risk of doubly stimulating exportation efforts, by squeezing domestic markets and attributing a new advantage to exportation.
Insofar as firm organization isconcerned, uncertainty also reigns. Certain comments seem to point to the possibility of dismantling the chaebols. This is not likely, at least in the short term, due to the essential role they play. However, these conglomerates will most certainly be required to carry out changes: adoptmore transparent structures, decrease debt, and adhere to more effective profitability. Up to what point will this profitability requirement incitefirms to decrease their foreign investment projects ? To operate their own plants in a more rigorous manner, and perhaps to reduce their workforce, as a certain number of bills relative to job cutbacks seem to indicate ? One might soon witness diverse forms of restructuration, forcing chaebols to acquire more industrial coherence capable of modifying the present landscape of the automobile branch. The constructor-supplier relationship,in particular, will be transformed. In addition, no one knows if these changes,in part financed by private foreign investment, will lead to increased foreign participation, notably American. Finally, a particular Japanese industrial structure could serve as a reference: we are referring to recession cartels functioning during periods of crisis by regrouping firms, banks, and the state so as to organize and implement restructurations,a situation which anti-trust laws tolerate temporarily.
In the final analysis, the Southeast Asian crisis forces us to reexamine Korean firms with a more precise eye. Already in the past, their actual level of industrial apprenticeship was put into question, by there cruitment of western managers and directors, by Hyundai's implantation of design offices in the United States, or by Daewoo's launching of so-called original models. An additional set of questions revolves around work organization and wage relations, especially in light of certain forms of worker autonomy and union protest which have been developing since the beginning of the 1990s. Last but not least, it has now become important to confront the differences existing among Korean firms: for example, Daewoo seems to distinctly distinguish itself from the others, by its investments abroad or by the fact that it did not suffer as much as the others from last year's social conflicts.