Whether or Not the Overseas Transferability of Hyundai Production System? : A Focus of the Supplier Relations of Hyundai Motor Manufacturing Czech (HMMC)

This paper attempts to explore how Hyundai Motor’s Production System, in particular, supplier relations have transferred into the Europe, with institutional circumstances different from those in Korea, especially the Czech Republic as an emerging place for the production of vehicles in the early 2000s by comparing Hyundai’s transplant called Hyundai Motor Manufacturing Czech (HMMC) founded in 2006 and Toyota’s called Toyota Peugeot Citroen Automobile (TPCA) built in 2002 in the Czech Republic.

Hyundai and Toyota have respectively invested over 1 billion Euro to produce their vehicles in the Czech Republic which joined in EU as a regular member in 2004. The Czech Republic has been selected as a production platform to export to the Western European countries in terms of its locational potentials such as the traditional infrastructure of mechanical industries and high quality of labor force as well as government policies to attract foreign capital.

Although given the almost same external conditions, a research hypothesis can be raised that the two car makers’ strategic responses to these institutional arrangements of the Czech Republic could be different each other. A major difference in overseas production strategies in Hyundai and Toyota would be due to their different arrangements in corporate governance which could result in the differences of supplier chain management in their transplants in the Czech Republic. With help of in-depth on-site interviews and a thorough review on relevant literature, we are going to characterize the European localization strategies of Hyundai and Toyota respectively as a one-sided ‘application’ to and an active ‘adaptation’ to local circumstances. 

Hyundai Motor has been led by the owner who has the biggest share of Hyundai Motor group. He has made active and quick decisions to increase the overseas production of Hyundai Motor in Europe. On the other hand the corporate governance of Toyota Motors is relatively complicated and balanced among the major shareholders including the banks and the affiliated companies as well as the founder’s family members. Toyota has made the cautious and long decisions to increase the overseas production in Europe.

Hyundai’s success in Czech could be attributed to the fact that Hyundai has successfully implanted its vertical supplier relations that has been developed in Korea in a green-field without any interruptions. The most of parts and components companies that supply to HMMC are Korean companies that have originally supplied to Hyundai in Korea. On the other hand, Toyota, which had built its transplant in the Czech Republic and faced with similar external conditions with those of Hyundai, has been running open and horizontal supplier relations. Peugeot has taken charge of developing and managing the supply chain of TPCA. The parts and components companies supplying to TPCA are not only Japanese companies but also European companies.