Invest KOREA

Quality, cooperation and innovation lie at the heart of Brose Korea's success

In 1908, Max Brose, founder of the German automobile supplier Brose Group, opened up a trading company for automobile accessories in Berlin. But dealing in vehicle parts was not enough—eleven years later he started developing and producing his own automotive products in the city of Coburg in Northern Bavaria.

Since then Brose has emerged as the world's fifth-largest family-owned automotive supplier. Today, the company has 24,000 employees working in 60 locations in 23 countries, including Korea. The main goal of Brose is to guarantee quality and innovation to increase comfort, safety and efficiency for drivers. It's because of this vision that the company has become so successful; its mechatronic systems for doors, seats or electric motors and drives can be found in every second new vehicle around the world today.

As the world's fifth-largest automobile market in terms of vehicle production, Korea proved to be an optimum market for the company, which established Brose Korea in 2002. In a bid to further expand its international motor business, Brose also set up a joint-venture with Mando Corporation, one of Korea's leading automotive suppliers, to form Mando-Brose in the Incheon Free Economic Zone.

To find out more about the company's activities in Korea, we talked to Stefan Halusa, President of Brose East Asia, on the occasion of Foreign Investment Week (FIW) 2016.

Please tell us about Brose and its business activities in Korea.

We specialize in mechatronics systems for vehicle doors and seats as well as electric motors and drives. Most of our products may not be visible to the driver because they're located somewhere under the hood or in the door, but our solutions enhance safety, comfort and efficiency. Our customers include around 80 car brands and over 40 suppliers. More than 24,000 employees generate €6.1 billion (USD 6.85 billion) in turnover.

On that note, Korea is home to the fifth-largest global car manufacturer, Hyundai Motor Group. That was more than a good reason to expand our business to Korea. We set up a local team close to the customer in order to react quickly and provide the best service, whether that is during the development phase of our products or during serial production.

We want to localize as many of our components in Korea as possible and that's why we set up a joint venture and established Mando-Brose Corporation, which develops and produces steering motors. As you know, Mando Corporation is one of the leading suppliers for steering systems, brake systems and suspension systems in the automotive industry. These products require electric motors, so in 2011 we teamed up to supply motors to Mando.

Were there any challenges that Brose faced while trying to expand its business in Korea?

In our case, the biggest challenge was that Korea has a very well-established and cost competitive supply base. The business structure is different in Korea than it is in Europe because its economy is largely influenced by big conglomerates and they're very well-integrated in the complete supply and value chain. Since strong customer-supplier relationships have been developed, it can be difficult for newcomers to be a part of the country's supplier pool and penetrate the local market.

How can Korea become a more ideal investment destination for foreign companies?

When it comes to doing business in Korea, an important factor for multi-national and foreign companies is openness. They want an open, non-discriminatory regulatory environment so that they can get the chance to develop sustainable businesses. Unrestricted capital inflow and outflows are important to us as well.

Aside from these aspects, it's essential for us to be able to bring in the right people to support and develop our business in Korea. We need flexibility on working permits so that we can bring in overseas technical experts; by doing so, we'll be able to also bring in their knowledge and technical expertise to Korea. At our headquarters in Germany, we focus on advanced development and technology so that is why it's even more important to have overseas talent come to Korea.

What are some of the goals or vision that Brose has in Korea and Asia?

Last year, we decided to change our organizational setup and made Korea our headquarters for our Asian business outside of China. This is because Korea is by far the second biggest market for us after China. So it's likely that there will be additional investment flowing into Korea to increase our business with car manufacturers in the region.

But we're not just working on projects with Korean car manufacturers. We're supporting our teams in Japan and ASEAN countries by further developing engineering resources and infrastructure in Asia.

You're participating in this year's Foreign Investment Week 2016 (Sep 27-29). What are some of the things you're looking forward to at the event and what does such an event mean for foreign companies?

Korea has reached a very important phase in its economic development. The tremendous growth in the past decades has been achieved by a rapid expansion of a very cost-competitive industrial sector. Today, Korea is one of the leading economies in the world and is even a member of the G20. But economic concepts and strategies of the past will no longer work in the future, and the country has to redefine itself to a certain extent in order to ensure further economic growth. I'm very interested to hear about the government's plan to shape that future, especially in regards to the so-called “creative economy”. As such, FIW is the premier event that provides foreign investors first-hand information from the government about future investment policies. And based on such information, investors can make efficient plans for future investments.

Do you have any last words for foreign companies interested in extending their reach to Korea?

Foreign companies should definitely look into Korea as a location for investment, especially because of its FTA network. These FTAs make it very easy for companies here to export their products to other countries. In our case, we're able to easily export our products from Korea to Europe, India and North America. I hope Korea will continue to improve their business environment by establishing new FTAs with more countries.

By Esther Oh (estheroh@kotra.or.kr)
Executive Consultant/Invest Korea