Hyundai Motor Group to Provide 120 Billion KRW Support for Small and Medium-Sized Parts Suppliers

[Asia Economy Reporter Kiho Sung] Hyundai Motor Group is joining forces with the government, local governments, and financial institutions to provide large-scale support for low-credit small and medium-sized automobile parts companies struggling due to the COVID-19 pandemic.

On the 19th, Hyundai Motor Group announced that it has decided to participate in the implementation of a large-scale financial program to support automobile parts companies with low credit ratings, together with the Ministry of Trade, Industry and Energy, the Ministry of SMEs and Startups, the Financial Services Commission, local governments, Korea Asset Management Corporation, Korea Development Bank, Industrial Bank of Korea, Korea Technology Finance Corporation, and Korea Credit Guarantee Fund.

The programs Hyundai Motor Group is participating in include: ▲ the 350 billion KRW scale ‘Win-Win Growth Fund’ by Korea Development Bank and Industrial Bank of Korea ▲ the 420 billion KRW scale ‘Win-Win Special Guarantee’ by Korea Technology Finance Corporation ▲ the 300 billion KRW scale ‘Win-Win Special Guarantee’ by Korea Credit Guarantee Fund ▲ and the 300 billion KRW scale ‘Original Contractor Payment Secured Loan’ by Korea Asset Management Corporation (KAMCO, hereafter referred to as Kamco).

Hyundai Motor Group plans to contribute a total of 120 billion KRW to this financial program. It will deposit 100 billion KRW to support the implementation of the ‘Win-Win Growth Fund’ by Korea Development Bank and Industrial Bank of Korea, and pay 10 billion KRW each, totaling 20 billion KRW, to the ‘Win-Win Special Guarantee’ programs of Korea Technology Finance Corporation and Korea Credit Guarantee Fund. For Kamco’s ‘Original Contractor Payment Secured Loan,’ Hyundai Motor Group will actively cooperate to ensure partner companies can smoothly receive financial support.

The reason why Hyundai Motor Group, along with the government and financial sector, is supporting the automobile parts industry in this way is to prevent the spread of damage caused by temporary liquidity shortages due to COVID-19 among small and medium-sized parts companies that possess technology and stable supply chains, and to protect the automotive industry ecosystem, which has significant upstream and downstream ripple effects.

First, Hyundai Motor Group will support the operation of the 350 billion KRW ‘Win-Win Growth Fund’ by Korea Development Bank and Industrial Bank of Korea. Hyundai Motor Group will deposit 50 billion KRW each, totaling 100 billion KRW, to the two banks, which will then lend 350 billion KRW?3.5 times the deposit amount?to small parts companies. The interest from the deposit will be used to reduce the loan interest rates for parts companies.

Additionally, Hyundai Motor Group will contribute 10 billion KRW to the Korea Technology Finance Corporation’s ‘Win-Win Special Guarantee’ program to enable preferential guarantees for automobile parts companies. Using a total special contribution fund of 31 billion KRW, including 10 billion KRW from Hyundai Motor Group and the government and 7 billion KRW from local governments, the Korea Technology Finance Corporation will provide guarantees for loans up to 420 billion KRW.

Hyundai Motor Group will also contribute 10 billion KRW as a special fund to the Korea Credit Guarantee Fund’s ‘Win-Win Special Guarantee’ program. Using contributions from Hyundai Motor Group, the government’s 10 billion KRW, and others, the Korea Credit Guarantee Fund will implement preferential guarantees and joint project guarantees totaling 300 billion KRW.

When small parts companies supplying finished car manufacturers apply for guarantees from Korea Technology Finance Corporation and Korea Credit Guarantee Fund to obtain bank loans, these two institutions will provide guarantees with reduced guarantee insurance premiums.

Due to COVID-19, the risk associated with loans to low-credit parts companies has increased, making it difficult to obtain guarantees or causing guarantee insurance premiums to rise. However, through this program, parts companies will be able to receive guarantees at insurance premium levels similar to previous years.

Hyundai and Kia Motors will also actively support Kamco’s 300 billion KRW scale ‘Original Contractor Payment Secured Loan’ program.

This program is operated by Kamco, which creates a financial support fund and provides funding to low-credit parts companies secured by payment claims.

Parts companies can receive loans secured by accounts receivable from finished car manufacturers, and Hyundai and Kia Motors will cooperate by verifying and recommending the scale of accounts receivable of their partner parts companies to facilitate smooth financial support.

A Hyundai Motor Group official said, “The management stabilization of automobile parts companies, which are a strong foundation of the automotive industry ecosystem, is essential to overcome the COVID-19 crisis and prepare for the post-COVID era,” adding, “We expect this financial program to greatly help resolve the funding difficulties of low-credit small parts companies.”

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