The CEO of a tertiary cooperative company of Hyundai Motor worried about additional costs following the government’s decision to raise the country’s minimum wage. 

But he was soon relieved upon hearing the news that Hyundai Motor and Kia Motors would provide financial support to their secondary and tertiary cooperative companies. 

He said his company, specializing in casting at the Sihwa Industrial Complex in Gyeongi-do, has a hard time borrowing money due to a lower credit rating as a small company with less than 10 employees, but now they can receive easy loans from Hyundai Motor Group. 

Hyundai Motor and Kia Motors on July 20 announced five “virtuous cycle” strategies to promote shared growth with their first, secondary and tertiary cooperative companies. First cooperative companies are subcontractors who directly supply automotive parts to the automakers. Secondary and tertiary cooperative companies are re-subcontractors who supply automotive parts to subcontractors. Hyundai Motor Group has about 300 first cooperative companies and approximately 5,000 secondary and tertiary cooperative firms. 

First cooperative companies’ demand for lower product prices to secondary and tertiary re-subcontractors has become a long-stand bone of contention between the parties. Hyundai Motor Group is intervening to address a possibility that a raise in minimum wages could deal a further blow to secondary and tertiary cooperative firms. 

The group has so far concentrated their efforts on promoting shared growth with about 300 first cooperative subcontractors. Both parties have singed “fair trade” contracts and the group has held a job fair for cooperative companies. Thanks to efforts, first cooperative subcontractors have seen sales surge at an annual rate of 9.1 percent during the past 15 years.  

The latest shared growth strategies call for improving management, strengthening competitiveness, making overseas market entries and supporting employment. It may reflect Hyundai Motor Group Chairman Chung Mong-koo’s determination, business analysts said. In his New Year’s address, Chairman Chung stressed shared growth. 

Hyundai Motor Group decided to contribute 50 billion won to a fund to help secondary and tertiary cooperative companies stabilize employment, create jobs, and ramp up R&D capabilities. 

The business group also plans to introduce a 100 billion won program to extend easy loans to secondary and tertiary cooperative firms to help them improve their management conditions. If and when the support for first cooperative subcontractors is counted, the group’s support to its cooperative automotive parts makers will rise to an equivalent of 730 billion won, a group official said. 

The business group plans to build a four-story win-win cooperation center building outfitted with educational programs. It also plans to hold a job fair for secondary and tertiary cooperative firms. A technology educational program and a seminar will be held for secondary and tertiary cooperative firms, consisting of education tailored to raise their technological competitive edge. 

Quality technology volunteer teams, which stay in their cooperative firms to provide technology guidance, will be expanded, while Hyundai Motor and Kia Motors inaugurate “win-win” consultation bodies to lend an ear to the voices of first and secondary cooperative companies. 

The business group plans to make first cooperative subcontractors’ supporting and nurturing of secondary and tertiary cooperative firms part of the evaluation of the so-called Win-Win 5-Star System, he said.