This is the seventh in a series of articles about promising foreign-invested companies. ― Ed.
ICHEON, Gyeonggi Province ― Electric cars and automated driving were the two hot trends of the Frankfurt Motor Show 2013, according to Sunwoo Hyun, the chief executive of Continental Automotive Systems Korea, the Korean unit of German auto part maker Continental AG.
Founded in 1871, Continental AG is headquartered in Hanover, Germany, with annual sales of 32.7 billion euros ($44.4 billion) and about 170,000 employees worldwide as of last year. It is one of the three largest global makers of auto parts.
Continental Automotive Systems Korea was established in 1987, starting with a factory in Icheon, Gyeonggi Province, which has since expanded into seven facilities with some 2,300 local employees. Korea is one of the 46 countries where Continental AG operates.
During an interview with The Korea Herald, the Korean CEO acknowledged that business entities could not ignore the market demand to force innovation.
“Electric cars will come, but only after they overcome the present infrastructural problems like their running time, recharging facilities and market demand,” Sunwoo said.
“Frankly speaking, the emissions rate is not the first priority for drivers these days. Market demand will naturally follow once the infrastructure for electric cars is ready,” he added, noting that gasoline and diesel-fueled vehicles would be Continental’s major portfolio for a long time.
Even for Continental, which carries out research every year, it is difficult to estimate when precisely electric cars will become dominant.
“The shift will be very slow. The general statistics suggest electric cars will take up less than 10 percent of all vehicles by 2020.”
However, Sunwoo stressed that Continental had poured long-term investment into research and development for electric cars. Continental and SK Innovation, a local developer of alternative energy, launched a joint company called SK Continental E-Motion in Germany in January, to jointly develop, produce and distribute electric car batteries. Continental reportedly plans to pour a total of 270 million euros into this joint company in the next five years.
Automated driving technology, in which the vehicle automatically travels while the driver stays idle, is another dream innovation anticipated by drivers and industrial experts. The Continental headquarters will be offering fully automated cars by 2025.
Sunwoo said that the company was not considering building more Korean factories at the moment, although there could be expansion of the production lines, should the demand grow.
The CEO admitted that the biggest challenge of automated driving lay in liability issues. “There are many hurdles in terms of legal support, such as who is to blame in case of accidents, which side needs to apply for the license, and what changes will occur in the insurance policies and so forth.”
On the annual sales objective of Continental Automotive Systems Korea, Sunwoo said he expected the figure to be around 2 trillion won, about the same as last year, largely due to the trade sanctions imposed on Iran.
“Iran cranks out about 1.4 million cars a year and we used to be the major supplier of their auto parts,” the CEO said. The company completely ceased to supply products to Iran by the end of last year. Fortunately, the growing production capacity of local automaker Hyundai Motor buffered the loss.
Sunwoo pointed out that Hyundai, one of his company’s major buyers, helped Korea become the second-most attractive market in Asia for Continental AG, behind only China.
“When I attend the annual senior executive convention held in the German headquarters, I realize how open the Continental executives are to embrace cultural differences,” he said.
“Once I suggested that Hyundai demands immediate, flexible feedback, which sometimes was not perfectly compatible with European principle-based management, and they were actually very understanding.”
The CEO took pride in the creative thinking ability of his employees, mentioning that Continental Automotive Systems Korea had topped the list for suggestions to improve operational efficiency for the past seven consecutive years.
Continental Automotive Systems Korea was one of the first companies here to adopt incentive policies for innovative suggestions, following in a long tradition among German firms. For every successful suggestion, posted on the company’s bulletin board, they are paid an extra 6,000 won ($5.61).
Additionally, for every suggestion that raises the company’s cost-efficiency, the company pays 1 percent of the total money saved in reward. For instance, an employee named Kim Se-jung made a suggestion about a rack cleaner that helped the company net save 50,300 euros every year, leading him to receive the award.
By Chung Joo-won (
joowonc@heraldcorp.com)
