| South Korean experience in saving a “domestic automaker” South Korea is often cited as an example of whether it is possible to create a powerful national auto industry practically from scratch. This example is truly striking, but ambiguous.
The development of the South Korean automobile industry began in 1972 under the pressure of dictator Park Jong Hee, who contributed to the formation of family diversified holdings - chaebols. The dictator himself created oligarchs and “assigned” them to a specific industry. According to his decision, four automobile chaebols appeared: Kia, Hyundai, Asia Motors and ShinJu, which later became Daewoo. Kia later merged with Asia. And two more chaebols began producing cars in small quantities - Ssangyong and Samsung. The auto industry was created under conditions of strict protectionism; the import of foreign cars was banned through the introduction of the highest prohibitive tariff. High duties were also imposed on spare parts, except for those whose production at national enterprises was practically impossible. But foreign capital was welcomed: the government guaranteed its immunity by law and bayonets.
True, the Koreans themselves did not invent the wheel in the automotive industry: they used exclusively Western licenses, and almost all major European, American and especially Japanese automakers gladly collaborated with South Korea. GM simply owned half of Daewoo, although in 1992 the Koreans bought this half. Everything went quite successfully, the country's motorization was carried out at a frantic pace, wages grew, and with it the cost of production, so the Koreans began to create car assembly plants in developing post-socialist countries - Uzbekistan, Romania, Poland and Russia. The Daewoo concern was especially successful in this expansion. In 1997, the Asian financial crisis broke out and the situation immediately worsened. Kia was the first to go bankrupt, its debt exceeding $9 billion. The remaining chaebols found themselves on the verge of bankruptcy with gigantic debts that they incurred under government guarantees. The government reacted radically - it took the automobile industry out of the chaebols and gave it into the hands of new oligarchs appointed by it. In 2000, the Koreans managed to recover from the shock and produce 2.6 million cars.
Ssangyong was bought by Daewoo, the Kia brand went to Hyundai, but Daewoo's management again turned out to be unskilled and even thieving. The head of the company fled, and the Korean government, true to its “honest protectionist” word, had to invest $2 billion in the company. True, Daewoo had an even more than $30 billion in debt. When it became clear that the Korean state budget was also not endless, the company was practically put up for auction. Ford had an eye on it, but the impatient automakers staged several strikes and thousands of people in scuffles with the police. Ford refused to acquire obstinate factories; GM picked up the baton. This story dragged on for two years, and from $1.5 billion, GM dropped to $400 million, but the workers still went on strike, seeking social guarantees. The Daewoo brand was going down, sales all over the world, except for the CIS countries, were falling catastrophically along with the quality of cars. Finally, last year the deal went through: GM acquired Daewoo.
Hyundai and Kia increased their exports to the United States by more than a third last year while trying to shed their image as makers of cheap, low-quality cars. They partially succeeded, but in terms of quality the “Koreans” are still very far from the “Japanese”, although Hyundai is partly owned by DaimlerChrysler (10%) and Mitsubishi (4.3%). In general, “the fire contributed a lot to its decoration” - the Korean auto industry emerged from the crisis not problem-free, but healthier.
The 30-year history of the Korean automobile industry would seem to indicate the attractiveness and effectiveness of the path chosen by this country. Out of nowhere, a powerful automobile industry emerged, capable of even aspiring to expand into other countries. But there are at least three “buts” that make you think about the limitations of using this experience. Firstly, for almost a third of a century, Korea has still not reached the level of the giants of the world automotive industry, including quality and reputation. Secondly, the state constantly spent huge amounts of money to maintain and save the industry. And thirdly, the question arises not only about the financial, but also about the political price of this success: should dictatorship become a prerequisite for more or less successful motorization? Alexander LIBERMAN |
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