The number of employees at first-tier suppliers to Hyundai Motor Group that owns South Korea’s No. 1 and 2 auto makers Hyundai Motor Co. and Kia Motors Corp. has been on the decline since last year, as their biggest customer is reeling from falling vehicle sales across the world.
According to the report released by the Korea Institute for Industrial Economics and Trade (KIET) on Monday, the combined number of workers at Hyundai Motor’s 29 major suppliers with annual sales of less than 100 billion won ($85.3 million) stood at 6,034 at the end of last June after falling from 6,290 in 2014 to 6,153 in 2015.
The latest founding indicated that the job growth in the country’s automotive industry is heading south after it peaked in the 2010s, according to the report.
Among the 29 suppliers, 16 companies experienced a decrease in employment last year. Nine companies saw payrolls decrease for two consecutive years, about twice higher than the number of companies whose employment increased.
Some of them are lucrative companies whose asset size exceeds 12 billion won, the criteria subject to independent auditing. Downsizing of these companies suggests that second- and third-tier suppliers are in more vulnerable situations.
The decline in employment is mainly due to poor business performance of Hyundai Motor Group. In particular, operating margin of the nation’s largest car maker Hyundai Motor has been consecutively falling since 2011 when it stood at the 10 percent range to 6.6 percent in the first six months of this year because of weak exports to emerging markets. The company’s operating profit in the first half of this year also declined 7.0 percent from a year ago.
Worse yet, the lengthy labor strikes by Hyundai Motor’s unionized workers in the second half that caused a product disruption worth about 3 trillion won and a rise in U.S. protectionism are expected to further cast cloud over the auto industry job outlook.
In order to prevent the nation’s auto industry from sinking like the country’s other backbone shipbuilding and shipping industries, industry experts suggested that the country should reform the auto industry to allow auto parts makers to reduce their reliance on Hyundai Motor Group.
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