Stefan Spreu, general manager of ElringKlinger Korea and vice chairman of the Korean-German Chamber of Commerce and Industry. (Korean-German Chamber of Commerce and Industry)
When governments interfere in markets, the result is often questionable.
This happened in Korea in the late 1990s when a decision in favor of “Korea Inc.” was driven, instead of allowing foreign original equipment manufacturers to come to Korea. The industry is still suffering from this decision, now culminating in the third insolvency of SsangYong Motor since 1997. The suppliers again will have to pay the bill.
Even though the Korean government is offering generous loan proposals, they are still loans -- that have to be paid back. For small suppliers, this means repayment over the next ten years, which will consequently limit their investments in new technologies and eventually weigh on their competitiveness.
Furthermore, this will very likely drive many suppliers into bankruptcy and further cement a monolithic industry model.
Is this really in the interest of Korean businesses? Korea as an export-driven country depends on a steady flow of foreign direct investment and innovation. A monolithic industry could be seen as a risk by potential investors in the stark contrast to neighboring China.
What are the chances then?
For SsangYong Motor, the current situation could serve as an opportunity to take responsibility for past decisions and to come up with a new vision.
Imagine converting SsangYong Motor over the next five years into “SsangYong eMobile,” a pure e-car manufacturer. Imagine about what it could do in the fuel cell and battery businesses by combining its automobile know-how with the great technology available in Korea.
While SsangYong Motor could create a new automotive industry environment, suppliers will also be able to take part in the global supply chain with new technologies.
Such a road map will also form a perfect match with Korea’s hydrogen strategy and its Green New Deal.
So, what needs to be done?
First, suppliers must be fully compensated so that they may walk the transition together with “SsangYong eMobile.”
Provide funds and support to transition SsangYong Motor into SsangYong eMobile, and with this make the company a desirable target for serious investors, not like the “plunderers of the past,” who did often not fulfill their commitment to investment and modernization.
Unionists, for their part, have to open up for change and dialogue, even if the procedure should cost some pain along the way. This temporary pain will open the doors to a sustainable future and prevent further losses.
Under the current payment system, suppliers tend to carry the main financial risk so they should be allowed to issue invoices including value added tax at the time of delivery, payable 30 to 45 days after delivery. Different VAT rates should be applied, depending on whether the supplied goods are for domestic sales or export.
Do not miss the chance to showcase that change is an opportunity that can lead to something better. It remains to be seen whether there is a willingness for change and to convert “The Monolith.” It remains to be seen whether there is a deep understanding that competition is good for the development of an industry segment and a country.
Do it differently this time. Assemble a team of international specialists to advise and guide SsangYong Motor in the transition to SsangYong eMobile. Give the company sufficient funds and a reasonable time frame for this journey. And, as a result, there will be a respectable list of prospects to buy the shares you will hold for funding the transition.Stefan Spreu is the general manager of ElringKlinger Korea and vice chairman of the Korean-German Chamber of Commerce and Industry. The views reflected in this article are his own. -- Ed.