I read the article today : http://www.hani.co.kr/arti/economy/economy_general/867812.html
The below graph is rate of business profit on automobile industry.
(Blue : Hyundai Motor, Orange : Subsidiaries of Hyundai Motor, Gray : Exclusive cooperative companies. )
While Korean government is trying to establish any plan supporting middle-small size companies in automobile field,
the national research center’s report has been submitted which states
this crisis of collapse is caused by the unfair subcontract transactions
based on modern slavery – “exclusive contract” between companies and Hyundai Motor.
According to the report “Present condition and prospect of Automobile industry” by Korea Institute for Industrial Economics & Trade(KIET)
during 10 years(2008~2017) the average rate of business profit of Hyundai Motor – 8.17%, Subsidiaries of Hyundai Motor(only 9 compaines) – 8.17%, but the exclusive cooperative companies(who can supply only to Hyundai Motor, it’s about 350 companies) – only 3.57%, not even half. For those cooperative companies, the middle-small size companies case is worse. Their return rate is only 2.9%
The report says that the main reason of big profitability difference and difficulty of middle-small size companies is the unfair subcontract transactions based on exclusiveness. Hyundai Motor fixes the target line and even supervising profit rate of those cooperative companies. Including Hyundai Motor, Car assembling companies force the cooperative companies to estimate irrational production cost, never accept increase of price even the price of raw materials rose, and constantly ask to decrease the price even they contracted at lowest price.
Because of low profit, middle-small size cooperative companies should reduce the finance for developing for new products and hiring outstanding skilled personnel. And it cause decrease of competitiveness and employment. So in auto parts business field, people write “exclusive contract” but read it as “slavery contract”
I found the same article in English as well. You can read more details on the article here: http://english.hani.co.kr/arti/english_edition/e_business/868719.html