1. Promotion of onsite and localized production of parts
(1) Growth and development of POONGSUNG Electric
In September 1980, POONGSUNG Electric established a facility in Changwon National Industrial Complex capable of producing 1 million units of electrical equipment, laying the foundation for securing technological competitiveness in the highly competitive automobile products market. Then, in November of the same year, the Electrical Equipment Business Unit and the Air-conditioning Product Division merged. The line was relocated to the Changwon Plant and put into operation.
After the establishment of the Changwon Plant in 1980, the company mass-produced starting motors (R2.5 2.5 kW starters), the main engine products for trucks, and generators (alternators) for Kia Motors’ NB1 Bongo. The Kia’s “Bongo” was a model that played an innovative role in the profit improvement of Kia’s business, at a time when it was impossible for them to produce passenger cars.
In 1983, production of door lock actuators began at the Seoul Plant, and these were mass-produced in succession in 1987, 1994, 1996, and 1999. In addition, the government had been providing technical instruction on 20 major automobile products since 1984, and it significantly strengthened administrative support by designating 42 manufacturers whose quality was judged to have reached a level equal to that of products from developed countries in terms of appearance, performance, and safety. In 1985, POONGSUNG Electric was designated as a Grade 1 Quality Control Plant, improving its position in South Korea and abroad as an automobile products manufacturer with the best technological prowess in both name and reality.
In 1986, the company began mass production of exterior motors (wiper motors and window motors), the “Fan Motor 101F” of compact fan motor, and the “70F Blower Motor” at the Changwon Plant to diversify its business, and developed and produced window motors for the Daewoo’s “Royale” until 1989.
Meanwhile, in the 1980s, domestic demand for air conditioners for passenger vehicles was increasing year by year. However, the total volume of compressors, the main part, depended entirely on imports, and localized production was an urgent problem. At that time, POONGSUNG Electric also imported from NIPPONDENSO to popularize the South Korean automobile market, but with regard to the production of products suitable for the climate in Middle Eastern countries such as Saudi Arabia, Kuwait, and Jordan, the prospects for export were bright, and localized production was urgently needed.
The company developed and produced heating and cooling products such as car A/Cs (coolers for the Pride), air conditioners for buses (bus sub coolers,) and truck heaters. Trucks were not equipped with air conditioners until the mid-1980s, but in 1986, POONGSUNG Electric developed and put into use an air conditioner for trucks (an air conditioner for 15-ton trucks and heavy equipment) with a high cooling capacity of 3,200 kcal per hour, equipped with automatic operation and a safety device. In 1987, the company also began localized production of parts for air conditioner thermostats for passenger cars and thermostats for bus coolers. In the 1990s, it dominated the air conditioner assembly market for the Kia’s “Pride” and supplied them exclusively.
In 1990, Chairman Hwang Gyu Sam resigned from POONGSUNG Electric and was succeeded by Chairman Hwang Sung Tae. The company was designated as a Grade 1 Quality Control Plant by the Industrial Promotion Agency, and its sales increased again. In 1991, the company’s sales exceeded 100 billion won, and customers sometimes referred to the “POONGSUNG Group,” combining affiliates POONGSUNG Electric and POONGSUNG Precision.
POONGSUNG Electric delivered medium- and heavy-duty alternators (vacuum pump integrated type), starters, actuators (door locks) for various DC motors (wiper motor, power window motor, etc.), air conditioner products for passenger cars, coolers for medium- and large-size buses, and electric power meters to South Korean completed-vehicle manufacturers such as Kia Motors, Hyundai Motor, Daewoo Motors, and SsangYong Motors, as well as Korea Electric Power Corporation, and grew into one of the mid-size but core leading enterprises in the 1990s.
From 1991, POONGSUNG Electric fully automated its DC motor production line, expanding its annual production capacity from 2 million to 2.5 million units. In 1993, through technical cooperation with NIPPONDENSO, it invested 15 billion won to develop South Korea’s first electronic fuel pump for use in the electronic control unit of gasoline engines and succeeded in localizing production. Simultaneously, an automated line for manufacturing equipment was produced in-house by a special purpose machine team, and 1 million units were produced and supplied to Hyundai Motor and Kia Motors through Original Equipment Manufacturing (OEM). A fuel pump is a device that draws fuel from a fuel tank and supplies it to a carburetor, and all fuel pumps were previously imported from abroad for use by South Korean completed-car manufacturers. Taking advantage of localized production of fuel pumps, POONGSUNG Electric gradually developed its own technology in the field of engine electronic control unit (ECUs).
Through this R&D, efforts to strengthen quality control and price competition paid off, and in 1993 the Ministry of Trade, Industry and Energy awarded POONGSUNG Electric the Productivity Award in the Automation Promotion Division. In 1994, POONGSUNG Electric was selected by the Industrial Promotion Agency as being in the top 100 for quality management. This system was first put into effect in 1994, and from among more than 20,000 enterprises in South Korea, the top 100 that excelled in quality management and produced products or provided services that satisfied consumers were chosen. Only 89 companies with excellent quality management were selected after strict screening at that time. The company also achieved ISO 9001 certification for all electrical equipment and electric power meters in 1995, and 100 pulse phase modulation (PPM) quality certification from Hyundai Motor and the Korea SMEs and Startups Agency in 1996.
POONGSUNG Electric grew into a mid-size but core enterprise with standard gross assets of 148.7 billion won and sales of 165.7 billion won in 1996. With its sustained technical development to that point, analysts evaluated that the company led the parts industry by doing business with all five South Korean manufacturers of completed cars and entered a stable growth stage due to its sound financial structure and cash flows.
Based on its technological capabilities and financial soundness, the company was ready to expand overseas. In 1996, it exported a plant worth US $1 million to China and was working with Kia Motors to expand into Indonesia. However, the valuable corporate history that POONGSUNG Electric had accumulated over the past 49 years was in danger of collapse before the sudden surge of the currency crisis in 1997. The company was placed in the situation of needing to make a critical decision.