Thursday, October 21, 2004

Hyundai Automotive Set to Expand in Steel Industry

In the mid 1990s, Hyundai Group founder Chung Ju-yong planned to build an integrated iron and steel works in South Gyeongsang Province. The Korean fiscal crisis of 1997 and an impasse with President Kim Young-sam’s administration stalled those plans.

The late founder's son and current chairman of Hyundai Automotive Group Chung Mun-koo, building on the success of the automotive company, is fulfilling the decade old family plan to move into the iron and steel industry.

Chairman Chung Mong-koo announced that the company plans to establish an integrated iron and steel making unit, beginning with the construction of a shaft furnace at the company's newly acquired Hanbo Iron and Steel works.

The chairman noted that it was difficult to produce the world's best cars, without first independently producing steel products. Hyundai Motor now imports some steel products from Japan in order to manufacture auto parts. I see this move critical in securing Hyundai position as the world's number 5 car manufacturer by 2010, an overarching company goal.

POSCO, the only integrated iron and steel works in Korea, currently monopolizes the supply of many basic steel products. Thus, Hyundai's plan would reduce its dependency on outside suppliers. Hyundai, following the model established by Henry Ford in the early twentieth century, is horizontally and vertically integrated in most of its car production and distribution. These functions are handled by roughly 26 Hyundai subsidiaries that include Mobis (auto parts manufacturing) and Glovis (global distribution and logistics).

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