A Dialectic Development of Korean Automobile Industry: Focusing on the Hyundai Productive Model

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Abstract:

This paper aims to explain the development of Korean automobile industry during the last four decades, focusing on Hyundai Motor Company (HMC). While Korea’s automobile industry is a unique case that has been exceptionally successful since World War II, there have been few studies on it. Korean automakers have expanded their market share in advanced countries as well as developing countries. HMC has grown as one of five major automakers in its production volume in the world. How can we explain the success of Korean automobile industry? In particular, what made it possible for HMC to develop its technology so rapidly and to produce quality cars so efficiently?

We are going to revise and develop an analytical framework that is based on the “production model” of GERPISA. GERPISA has accumulated diverse case studies of the world automobile industry from its institutional perspective. The concept of production model has been useful for explaining the complexities of automobile industry, considering not only micro factors but also macro factors.
HMC substantially represents Korean automobile industry in terms of its share of production and sales in the national economy. HMC is currently the only Korean domestic automaker, because the other Korean automakers were taken by foreign companies after the foreign exchange crisis in the late 1990s. However, the success of HMC is not only due to its own strategy but also attributable to other institutional factors such as government policies. We are going to explain the dynamic development of Korean automobile industry, focusing on the corporate governance compromise in product policy, production organization, and employment relations.

Our main puzzle is why HMC has developed such a unique production model, even though it originally tried to adopt the Japanese production model. Since the early 1970s when HMC decided to pursue its “own model strategy”, HMC has developed an “engineer-led” production model, downplaying the participation of production workers, because the company could not invest in skill formation of production workers under the hostile labor relations. Based on this governance compromise, HMC has developed a unique production model that depends on the flexible automation and a high level of information system. The engineer-led production model of HMC has efficiently contributed to the exceptionally rapid technological development of Korean automobile industry.

HMC also has succeeded in transferring its production model to other countries, including the U.S. as well as developing countries such as India and China. This demonstrates that the HMC’s production model is relatively easy to transfer to other countries, compared to the Japanese production model that heavily depends on the skill formation of production workers.