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Renault Samsung fosters parts industry

Renault-Nissan Alliance connection opens new opportunities for local suppliers


Renault Samsung Motors Co., which has increasingly been turning its eyes to exports in its drive for growth, is now providing a stepping stone for its suppliers to reach the wider global market.

While the company ranks fourth among South Korea’s five carmakers in terms of export volume, Renault Samsung’s exports have grown at an unprecedented rate.

In 2001, its first full year, the company was almost entirely reliant on domestic sales with the export figure coming in at 140 vehicles.

However, using Renault Nissan Alliance’s global sales network the company was able to rapidly increase shipments abroad and last year saw the company ship almost 116,000 units, an 827-fold increase compared to 2001.

In addition to the boost gained from its parent firm’s network, the company says that such changes are the results of its strong emphasis on quality.

However, the company is not taking all the credit, and has implemented various measures designed to benefit the suppliers.

One such measure is acting as a bridge connecting local parts makers to Renault Nissan Alliance, and the global market.
Renault-Nissan Purchasing Organization officials visit a Korean parts supplier in January. (Renault Samsung)
Renault-Nissan Purchasing Organization officials visit a Korean parts supplier in January. (Renault Samsung)

In a departure from the usual proceeding where the Renault-Nissan Purchasing Organization holds its annual conference in France or Japan at the beginning of a year to finalize the companies’ purchasing strategies for the year, this year’s meeting was held at Renault Samsung’s facilities in Busan and Gyeonggi Province hinting at intentions to increase purchases from Korean parts makers.

Renault-Nissan Purchasing Organization is responsible for purchasing and quality control of parts for the operations of both Renault and Nissan.

The executives also visited Renault Samsung suppliers during their week-long stay in the country, giving parts makers the opportunity to promote their companies first hand.

“Established in 2000, Renault Nissan Purchasing Organization is an important part of the alliance that made purchases worth 95 trillion won ($84 billion) in 2009,” Renault Samsung’s purchasing division chief Kim Hyoung-nam said.

“The conference provided an opportunity for competitive parts makers to open routes to Renault and Nissan, and to grow into core suppliers within the Renault-Nissan Alliance in the future.”

According to Kim, local parts makers are highly competitive and in some cases have an edge over their foreign rivals. 
Kim Hyoung-nam
Kim Hyoung-nam

“Main advantages (of local parts makers) are speed and cost, and they also show strength in terms of quality,” Kim said. He added that speed refers to the fact that parts makers have the ability to respond quickly to the needs of buyers, and that high standard of quality is evidence that the production process and quality management is being conducted according to strict regulations.

“When visiting a supplier, you can see that they have the latest technologies, and in some areas local firms are at the head of the game.”

However, Kim says that the lack of effective marketing channels to promote their products overseas, limit their chances abroad, making their relationship with Renault Samsung far more than a stable source of income.

“Renault Samsung provides fullest support in helping local firms to export to Nissan and Renault. The recent conference with the chief of Renault-Nissan Purchasing Organization is a good example that shows the company’s strategy for shared growth,” Kim said.

“Through such meetings, the competitiveness of our suppliers can be fortified, which in turn benefits Renault Samsung.”

Renault Samsung is optimistic that the Renault-Nissan Purchasing Organization’s conference in Korea held in January will lead to positive results for the country’s auto parts industry, whose exports to the French and Japanese carmakers are already on the rise.

According to Renault Samsung, Renault-Nissan Alliance’s purchases from local firms has increased rapidly in recent years rising from 32 components from 28 companies in 2009 to 377 parts produced by 82 companies last year.

In terms of value, local firms’ sales to the carmakers came in at 12 billion won in 2009, which jumped to 69 billion won in 2010.

“The conference and the visits to suppliers showed locally produced parts’ quality and price competitiveness first hand, and negotiations on increasing sales to Nissan and on ways to expand opportunities with Renault were conducted,” Kim said.

“The results of the visit will soon become visible in the form of increasing exports.”

By Choi He-suk (cheesuk@heraldcorp.com)
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