Starting in 1998, the climate in the Korean automotive industry will resemble anything but business as usual. The massive Samsung Group's entry into the auto business is already shaking up an industry which for decades developed as the private domain of a few major conglomerates. The existing automakers are scared stiff.
Less than a year after announcing its entry into the world car market, Samsung Motors has begun crafting the vehicles that will make or break its image. The neophyte will add a new dimension to the Korean market and give automakers worldwide more to think about. In the pipeline are four prototypes -- one for Korea, the U.S., Asia and Europe -- which Samsung will display at the 1997 Seoul Motor Show.
Samsung's first priority is the Korean market. On the drawing board for its home turf is a 1.5L 4-door midsize sedan -- which it is designing in conjunction with Nissan Motor Co. Ltd. -- that will hit the Korean market in 1998. A Samsung engineer, who wishes to remain anonymous, says the car will be fitted with a smaller engine than is typical of a midsize sedan mainly because of the hefty taxes that are applied to cars over 2L.
Samsung Executive Managing Director of Automotive Planning J.H. Yoon denies reports that the car will be a clone of Nissan's Sunny, Pulsar, or Bluebird model,
"Our first model entry will be a brand new model that is unique to Samsung. There are no plans at this time for Nissan to market the car. Much later, if Nissan needs the car and Samsung has the capacity, we may consider joint marketing. But that would have to be beneficial for both companies," says Yoon.
By 2002, the company wants to be producing small (1.5L and less), medium (1.5L - 2.0L) and large (over 2.0L) passenger cars. Samsung currently is constructing an assembly plant in Pusan, Korea. Yoon says initial capacity will be for 120,000 units, rising to 500,000 units by 2000. However, Samsung will not actually be producing 500,000 annually until 2002. The firm's total investment in the auto business ever the next eight years will be 4.3 trillion won (US$5.4 billion).
Although Samsung may ship the 1.5L car overseas, the company also is developing cars specifically for export markets. Samsung's regional offices in the U.S., Asia and Europe will develop prototypes for each market using experienced local engineering firms. Samsung's Korean design studios will take cues from the prototypes in designing actual production models.
Samsung already is recruiting independent engineering firms and suppliers to transform sketches for its first U.S.-market car into reality. The company has approached a number of engineering and prototype shops including Modem Engineering, The Budd Co.'s Milford Fabricating Operations, MascoTech Automotive Group, International Automotive Design, and ASC Inc., about building a concept car. Samsung officials also concede the firm will establish an R&D center in Ann Arbor, Mich., in the next few years. The center will focus on safety, emissions and new technology development.
Samsung is taking a different tack than most Korean automakers in its approach to making cars. Typically, the Koreans are known for churning out low-cost cars from basic platforms and exporting them globally. However, the Samsung Group conglomerate, or chaebol, has the resources to go beyond tradition.
"If we (Samsung) want to get in to these markets, we have to sacrifice something," says the Samsung engineer. "Sure, it would be more efficient to make a world car like Ford (Motor Co.) has done, but we don't want to take the time for trial and error When Hyundai came in to the U.S., it lost its image and had to build it back up slowly. When we come in, we want our image up high and we may sacrifice some efficiency to get that image. We might have to come up with several cars based on the same platform that are totally different cars. Samsung's goal is to do in 20 years what is typically done in 40 years. And let me tell you that money is no issue. We can afford to. cut out the trial and error," says the Samsung insider.
The automaker is looking to source numerous parts and components locally for the U.S. car, which will bow in 2002. Samsung's quest for U.S. components may provide a sound foundation for its U.S. debut, especially in light of ongoing trade friction between the U.S. and Japan over parts purchases.
However, Korean manufacturers will get the first chance to supply major components for the U.S. vehicle. Only if quality and prices are more favorable here will U.S. partsmakers get the nod, says the insider.
"From a business standpoint it makes good sense for Korea to outsource. But we have to deal with Korea's government, which is very nationalistic. Korea is watching for possible trade friction with the U.S., but I don't think we will get into what the Japanese have, where their decisions are solely based on nationalism. But it also depends on how big our car industry gets and how much of a threat will it be to the Big Three. The Big Three respond to threats with threats."
