"Automotive Industry Facing Production Cliff... Labor Relations and Regulatory Innovation Are Key"

Automobile Industry Association Development Forum Held
"Active Flexibility Needed for Survival"

[Asia Economy Reporter Kiho Sung] As the Korean automobile industry faces a crisis known as the production cliff, there are calls for resetting labor-management relations and implementing sweeping regulatory innovations to increase domestic production. Analysts argue that in a period when the global automobile industry is shifting from internal combustion engines to eco-friendly vehicles, active flexibility is essential for survival.

On the 21st, the Korea Automobile Industry Association held the 7th Automobile Industry Development Forum at the Korea Automobile Industry Association's main conference room under the theme "Development Strategy of Korea's Automobile Industry." The forum was organized to diagnose the severity and objective status of the recent crisis facing the Korean automobile industry and to explore policy task solutions.

The forum featured keynote presentations by Cho Cheol, Director of the Korea Institute for Industrial Economics & Trade; Professor Kim Dong-bae of Incheon National University; Kim Cheol-hwan, Executive Director of Innosync Consulting; and Professor Song Han-ho of Seoul National University. Additionally, former President Yoo Ji-soo of Kookmin University served as the chair, with panelists including Professor Lee Ji-man of Yonsei University, Professor Kim Jin-guk of Paichai University, Associate Research Fellow Jung Heung-jun of the Korea Labor Institute, and Director Lee Jae-gwan of the Korea Automotive Technology Institute.

Participants pointed out that the Korean automobile industry is currently facing a production cliff crisis, which is by no means a short-term issue. Director Cho stated, "Since 2011, Korean automobile production has been on a long-term declining trend," adding, "Especially in exports, production dropped sharply from 3.17 million units in 2012 to 2.4 million units in 2019, a decrease of 770,000 units, which is a larger decline than the overall production decrease of 710,000 units." He emphasized, "The survival and development potential of the Korean automobile industry depends on the maintenance and expansion of automobile production."

Regarding solutions to escape the crisis in the Korean automobile industry, participants stressed the need for resetting labor-management relations and regulatory innovation. Professor Kim Dong-bae said, "Flexibility is not only about the ease of corporate layoffs but also about successful transitions from school to work, from one workplace to another, from unemployment or inactivity to employment, and from work to retirement," adding, "However, in domestic labor-management relations, (regular) employment flexibility has been a taboo."

To overcome this, Professor Kim explained, "Labor and management must face reality and introduce and practice the concept of flexible stability at the corporate level," and "Labor and management need to share a realistic understanding and build partnerships for problem-solving."

There was also criticism that government regulations must be flexible as the automobile industry enters a transitional period. It was explained that missing the timing of regulatory reform could adversely affect the development of new businesses. Executive Director Kim Cheol-hwan pointed out, "GM's car-sharing business, Maven, began service in 17 U.S. cities within one year of launch and plans to expand globally," contrasting this with Hyundai Motor Group's carpool service, which, after investing 5 billion won in 2017, transferred all shares within six months due to opposition from the taxi industry and the government's lukewarm attitude.

Professor Song Han-ho, regarding the transition to eco-friendly vehicles, stated, "In the current situation where the market maturity of electric vehicles is low and there are regulatory response limits for internal combustion engine vehicles, policies and businesses biased toward only one side inevitably face limitations," and argued, "To respond to current greenhouse gas regulations, an appropriate combination of electric vehicles and internal combustion engine vehicles is necessary, along with balanced government policies to support this."

This content was produced with the assistance of AI translation services.