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Auto parts occupy an important position in vehicle production, especially monopolistic parts suppliers. Recently, reporters learned that South Korean diesel engine production was interrupted due to a 7-day strike by a Korean “piston ring†company. The automotive industry was once caught in a production shutdown crisis. Hyundai Motor Co. and Kia Motors lost more than 10 billion won. According to the Korea Automobile Industry Association, auto companies need to establish a long-term strategy for the diversification of spare parts suppliers.
It is understood that the engine cylinders usually need to be equipped with four piston rings. Due to the suspension of production of the piston rings, the supply of automobile engines is insufficient. Therefore, the Hyundai Motor Ulsan factory once stopped working overtime to produce models such as Santa Fe, Tucson ix and Veraix. Its production lines are even comprehensive. Production was suspended; Kia Motors temporarily shut down its K.W. diesel engine due to lack of inventory. Workers of the Hyundai-Kia component supplier Yoosung Enterprise stopped production because the workers did not agree with the new pay agreement and shift system. According to Hyundai-Kia Motors, about 70% of the piston rings required for hot-selling models come from Liu Cheng, such as the Sonata sedan, Santa Fe SUV, Kia K5 sedan and Lions Run R SUV.
After Liu Cheng’s employees went on strike for seven consecutive days, the wave of strikes by South Korean auto parts companies was subsidized, but five South Korean car companies have been damaged. The strike enterprise is Liu Cheng. Since January of this year, the employer and the employee are in an opposing position. Whether the two parties dispute the introduction of two weekly shifts and a monthly salary system for production workers. Liu Cheng produces the piston rings required for automotive engines and accounts for 80% of the Korean piston ring market.
The Korean automotive industry began to worry about similar incidents. Because there are several monopolies similar to Liu Cheng in Korea. According to incomplete statistics, there are more than 10 parts and components companies with market share exceeding 70%. Kang Cheol-gu, a board member of the Korea Automobile Industry Association, pointed out that in order to avoid suspension of the entire automotive industry due to the disruption of the supply of a key component, Korean auto companies need to revisit the long-term strategy, especially the strategy of diversified supply of spare parts.
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In the course of the development of the automotive industry in the world, the three most representative relationships between vehicle and component companies have gradually emerged:
The first is a parallel supply system represented by Germany, in which the entire vehicle company and parts and components company develop in parallel, and the entire vehicle company purchases products from parts and components companies on the basis of the principle of marketization to form a matching relationship.
The second type is the pagoda-type supply system represented by Japan. Japan's OEMs such as Toyota generally only have direct relationships with ancillary suppliers. Level 1 suppliers are assembly systems or module suppliers with product development capabilities.
The third type is a diversified supply system represented by the United States. The three major automobile companies in the United States originally had spare parts subsidiaries. They later adjusted their organizational structure and gradually realized the separation between the two. However, the two companies still maintain close matching relationships.