Hyundai Mobis accelerates pace. On March 12 the board of directors of Hyundai Mobis decided to take over Apollo Industries, a company specialized on plastic bumpers. The take over of Apollo Industries is part of the strategy to extend the F&E segment (integrating and assembling car bumpers, head lamps, radiators) by utilizing bumpers and console boxes. At this opportunity Hyundai Mobis is going even one step further. Next to Apollo Industries there are plans in the pipeline for merging its affiliates Jinyeong Industries and Inhee Lighting, too. To take in even Jinyeong Industries and Inhee Lighting is part of the plan to strengthen its power for international competition. With combining the main products of these two companies, i.e. headlights and bumpers, with Apollo Industries’ main bumper product line, the thinking goes, Hyundai Mobis is going to pioneer in a future growth industry. Among experts of the field the suggestion dominates, that Hyundai Mobis made up its mind to get into the ‘global top-ten’ as an international automobile components maker. “If Hyundai Mobis safely arrives on the world’s market, also other domestic components businesses following suit will benefit by the added value effect,” Sa Gong Mok, researcher with Industry Research Institute, expressed his expectations. By strengthening negotiation power with components delivery companies effective cost control becomes possible and price competitiveness can be increased. So, that in the end this will help the international competitiveness of the company in the long run. For example, Hyundai Mobis can obtain cooperative parts and headlights etc, which it needs for its F&E module business, simply from related companies like Halla Cooperation and Samnib Industries. And with this as a basis Hyundai Mobis can develop the F&E module business into a new business segment. Plans to buy in even Apollo Industries’ affiliates Of course, it will be difficult for Hyundai Mobis to invade the top-ten right away by just having said it has prepared the basis for growth. Hyundai Mobis was thinking about entering the auto electronic parts sector taking the completion of the Cartronics Research Institute as an opportunity. With this take over now it enabled itself to solve this problem. “The automobile electronics sector stands in close relation to the F&E module business. About next year the first synergy effects of this merger will become visible,” a Hyundai Mobile official said with confidence. However, there are also voices, which speak worried about the fast pace of Hyundai Mobis’ recent actions. Especially the mercilessness of large companies’ capital is being criticized in the industry. Another aspect of criticism is due to the difficulty to estimate potential added values following the taking over Apollo Industries. On March 15 Samsung Securities filed a report relating to Hyundai Mobis, in which it stated, that last years’ ROE of Apollo Industries did record for not more than 4.7 per cent, pointing out that a take over of Apollo Industries through Hyundai Mobis might have its limitations. Since, in the long run improper factors could be reflected on the market, which could have negative impacts on stock price increases. And also, it is important to note that through taking over Apollo Industries Hyundai Mobis’ funds were burdened. “This years’ free cash flow of Hyundai Mobis is expected to be \191.8bn, and buying shares of Hyudai Automobile and Apollo Industries \200.5bn are going to be needed. On top of that, if one considers the \106.bn of dividends (\1250 for each share according to 2003 results) increase of net debts cannot avoided,” Kim Hak Ju, head of Samsung Securities’ automobile section said. In the short run financial structure could even worsen And there is another mountain to climb. Based on the idea that F&E module production will be possible by concentrating on Inhee Lightings head lamps Hyundai Mobis plans to combine these with cooling systems of the cooperating companies Winiamando and Doowon Cooperation, in order to supply F&E modules in a short period of time. However, it is unclear whether the trade unions of these companies will agree on that, after all. Since trade unions of these companies have already expressed their negative opinion about huge capital of large companies taking over market segments of small- and medium-sized companies. Despite that, if seen in the whole, it seems that strengthening of Hyundai Mobis’ international competitiveness will after all brighten the future of domestic automobile components businesses, too. “Since Hyundai Mobis is already on the same level with global companies like DaimlerChrysler, this take over will fix wings on top of that and boost its international competitive power immensely,” an official of Foundation of Korea Automotive Parts Industry (KAP) emphasized. In other words, Hyundai Mobis’ ambitious plan to enter the league of the top-ten automobile components suppliers has been speeded up, and its accomplishment becomes more realistic. Also the market seems to be in favor of Hyundai Mobile. Especially is appreciated that new sources of profit are provided and a step stone for growing to a global components supplier seems laid. “If Hyundai Mobis takes over Apollo Industries, a scale of about 200,000 peaces is possible for the F&E module production. And think of next years’ additional investments, with which more than one million peaces could be supplied. Investment fees will contribute highly to profits,” Kim Sang Ik, researcher with Daeshin Economy Research Institute, said Anyway, it is clear that Hyundai Mobis prepared its way to grow up to a global automobile components company. Professor Hyun Yeon Seok, who emphasizes that “the way for South Korean components companies is clear”, hints: “A globalization strategy of selection and focusing is pressing, and for that elder brother Hyundai Mobis has to consolidate its substance and accumulate the capability for developing a unique technology.” In other words, Hyundai Mobis should rather look at the long-term dimension than focusing too much in swift actions.