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Old 19th January 2007, 11:06   #1
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Default Hyundai Motors fined for unfair business practices

South Korea's corporate watchdog on Thursday imposed a preliminary fine of 23 billion won (US$24.5 million) on Hyundai Motor Co., South Korea's No. 1 automaker, over a range of unfair business practices.

Ending a nine-month probe, the Fair Trade Commission (FTC) levied the fine on the automaker for setting "excessive" sales targets on dealers and forcing them to extend their contracts.

"Our investigation has also confirmed Hyundai Motor issued warnings to dealers for their weak performances, and closed seven branches since 2003 due to weak sales," said Kim Won-joon, director general of the FTC's headquarters for competition law and policy enforcement.

The fine is the second largest by the FTC, after a 33-billion-won fine for U.S. software giant Microsoft Corp. in 2005 for bundling programs with its Windows operating systems.


However, the FTC said it will finalize the amount when Hyundai submits more sales data. The preliminary fine is based on 2006 sales alone, it added.

On the sidelines of the ruling, Kim also noted Hyundai's price hikes of its small and mid-sized sedans in the past 10 years, in comparison with the overall drop for the company's luxury Grandeur models, citing the latest figures from the auto industry.

"It seems as though Hyundai was able to easily raise prices for its smaller Sonata, Verna and Avante models, while keeping prices relatively low for large sedans in fear of competition of luxury models from foreign carmakers," said Kim.

The company is also under investigation by the FTC as the commission announced last September its plans to probe Hyundai Mobis Co., Glovis Co., Hyundai Hysco Co. and five other affiliates over alleged unfair deals among the group's subsidiaries.

On Wednesday, Hyundai's labor union agreed to end a partial strike that began Monday after accepting a company proposal to pay each unionized worker a special bonus of 50 percent of his or her monthly salary. Hyundai said it would pay the bonus after the workers make up for the production of 21,682 vehicles that was lost as a result of the recent strike and the refusal to work overtime, which began at the end of December.

Shares of Hyundai Motor closed at at 65,100 won, down 0.15 percent from Wednesday's close.

Seoul, Jan. 18 (Yonhap News)

Source: FTC fines Hyundai Motor for unfair business practices : Business : Home

Related links:
South Korea Fines Hyundai Motor | Chron.com - Houston Chronicle
Competition Authority Fines Hyundai Motor Over Unfair Practices - Biz News - Playfuls.com - Business & World
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Old 19th January 2007, 12:32   #2
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Quote:
Ending a nine-month probe, the Fair Trade Commission (FTC) levied the fine on the automaker for setting "excessive" sales targets on dealers and forcing them to extend their contracts.

"Our investigation has also confirmed Hyundai Motor issued warnings to dealers for their weak performances, and closed seven branches since 2003 due to weak sales," said Kim Won-joon, director general of the FTC's headquarters for competition law and policy enforcement.
Whats wrong with setting targets and closing down branches that were weak in performance? I didnt quite understand the "forcing them to extend contracts" line though.
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Old 19th January 2007, 12:50   #3
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Probably they mean by those stretch targets that are impossible to achieve. So its like i will get 50% of my sal (hypothetical example) as a variable component, only if i achieve certain targets. But those are set so high, that it is impossible for anyone to achieve that.

Forcing contracts- maybe there is a period after which each party can evaluate the relationship, and the dealer also has an option wether or not he wishes to continue being a hyundai dealer...

This is my take... could be wrong

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Old 19th January 2007, 13:03   #4
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I had the same thought like GTO. Is there something wrong in this?

As a Hyundai hater, I expected some serious business malpractices when I read the title of the thread. But man, I was nowhere near that.
Other than some Monopolism tactics which most of the companies should be guilty of, I don't see much wrong here.

What about some serious troubles caused like False Advertisements, indirect blaming of other car makers, false sales figures, false power claims, irresponsible salespersons etc... Those things went unnoticed?
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