Public-Private Partnership to Save 'Worst' Auto Parts Company... 420 Billion Won Win-Win Guarantee

Complete Vehicle Manufacturers, Local Governments, and Government Sign Mutual Guarantee Agreement to Support Auto Parts Industry
Applications Accepted from the 18th at Technology Guarantee Fund Branches Nationwide
Operating Funds Up to 3 Billion KRW, Facility Funds Up to 10 Billion KRW Provided

[Asia Economy Reporter Moon Chaeseok] The government, together with completed car manufacturers, the Korea Technology Finance Corporation, and local governments, will provide a win-win special guarantee worth 420 billion KRW to small and medium-sized enterprises (SMEs). This is because the auto parts industry is considered to be in the most difficult situation due to the novel coronavirus infection (COVID-19).

The Ministry of Trade, Industry and Energy and the Ministry of SMEs and Startups announced on the 11th that they held a 'Win-win Special Guarantee Agreement Ceremony for Supporting the Auto Parts Industry' at the Korea Automobile Manufacturers Association.

At the end of May, the government, local governments, and the completed car industry agreed to establish a win-win program for financial support of auto parts companies worth more than 500 billion KRW. Completed car manufacturers pledged 24 billion KRW, the government 20 billion KRW, and local governments 9.5 billion KRW.

At the agreement ceremony, it was decided to operate a 420 billion KRW guarantee program specialized for SMEs through the Korea Technology Finance Corporation. The completed car industry will contribute 14 billion KRW, the government 10 billion KRW, and local governments about 7 billion KRW respectively.

The program mainly supports parts companies. Eligible companies are parts companies with assets under 100 billion KRW and fewer than 1,000 regular employees among 1st to 3rd tier suppliers recommended by completed car manufacturers and local branches of the Korea Technology Finance Corporation.

Even if the current credit rating is low, the principle is to support companies that have business history, technological capabilities, and secured delivery contracts.

Support will be about one-quarter to one-third of the annual sales per company. Working capital support is up to 3 billion KRW, and facility funds up to 10 billion KRW.

For working capital, technology-intensive SMEs can receive up to 5 billion KRW, and excellent technology companies up to 7 billion KRW as the upper limit.

The government's emergency financial support focused on auto parts companies is evidence of how seriously it views the industry's management difficulties caused by the COVID-19 impact.

On the previous day, just before the '2nd Expanded Trade Strategy Coordination Meeting' chaired by Prime Minister Chung Sye-kyun, the government stated that it views the management crisis of the auto parts industry as serious.

An official from the Ministry of Trade, Industry and Energy explained, "Regarding trade finance support, we do not pre-judge specific industries, but we see the auto parts industry as the most difficult."

Companies can apply for the program at Korea Technology Finance Corporation branches nationwide starting from the 18th. After submitting documents and about a week of review, they will receive a guarantee certificate. Applications can be made at banks and NongHyup.

The Korea Technology Finance Corporation will reduce the guarantee fee by 0.3 percentage points, and Shinhan Bank and Hana Bank branches will additionally reduce the guarantee fee by 0.2 percentage points.

Minister Sung Yun-mo of the Ministry of Trade, Industry and Energy said, "We will build a dense liquidity support network for parts companies so that companies with technological capabilities and delivery capacity but low credit ratings can overcome the crisis," and added, "We will promptly launch a win-win guarantee program for supporting mid-sized parts companies within this month in consultation with related institutions such as the Financial Services Commission and the Korea Credit Guarantee Fund."

Minister Park Young-sun of the Ministry of SMEs and Startups said, "This win-win special guarantee agreement will serve as an opportunity to firmly establish a co-growth platform where the government, large corporations, and SMEs cooperate," and added, "We plan to listen to field difficulties to support the transition of auto parts companies to future vehicles."

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