Heads of South Korea’s major automakers gathered on Monday to jointly address their common challenges from business setbacks in China to higher labor costs after a court expanded the base salary scope in a recent lawsuit against Kia Motors.

Korean automakers vowed to actively respond to global auto market’s demand by expanding investment and releasing new cars as well as strengthening partnership with suppliers during the Korean auto industry’s meeting led by Trade, Industry and Energy Minister Paik Un-gyu on Monday.

Hyundai Motor and its sister Kia Motors Corp. during the meeting pledged 250 billion won ($221 million) in advance payment to its parts suppliers in China to help relieve their liquidity problems from sagging sales of the two Korean automakers. The automakers currently reimburse supplier’s investment in auto parts molding facilities in installments over five to six years but they will make one-off payment instead.

Hyundai Motor recently experienced a temporary closedown of its factories in China after local parts makers refused to supply parts over payment delays. The Korea’s household name Hyundai Motor and Kia Motors are struggling from shriveling sales in the world’s largest auto market as Chinese consumer are shunning Korean brands amid diplomatic spat over Korea’s deployment of a U.S. missile shield. Auto parts makers in China supplying products to the Korean automaker are also suffering from liquidity squeeze.

On top of the withering sales in China, Kia Motors recently lost a court battle against its unionized workers that would result in extra burden from increased wage expense. Kia Motor’s CEO Park Han-woo said that the management is examining the court ruling. He indicated the management could move their manufacturing bases overseas.

Separately, Kaher Kazem who recently was appointed to head the Korean unit of U.S. automaker General Motors Co. (GM) said the American automaker is restructuring its business to focus on the market where it can make profits and strengthen its performance. He stressed that GM Korea needs measures to boost its strength and improve cost structure in Korea.

During the meeting, both Renault Samsung Motors Co., the South Korean unit of French carmaker Renault S.A. and Ssangyong Motor Co., Korean unit of India’s Mahindra & Mahindra Ltd. unveiled their plans to release new electric car models over the next five years.

Korea Auto Industries Cooperation Association forecast the auto parts industry to invest nearly 10 trillion won ($8.8 billion) and create 20,000 new jobs over the next five years.

By Ko Jae-man

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]