AOH :: ISN-1577.HTM

Hyundai falls victim to industrial espionage

Hyundai falls victim to industrial espionage
Hyundai falls victim to industrial espionage 

by Kim Tae-jin, Lee Chul-jae 
October 25, 2005 

Hyundai Motor Co. said yesterday that one of its subcontractors leaked
crucial information on new car models to a Chinese car manufacturer.

Cutting-edge Korean technologies in fields such as computer chips,
liquid crystal displays and mobile phones have been cribbed by Chinese
companies in the past. However, this marks the first time that Korean
autmotive technology has fallen prey to such practices.

Hyundai Motor said a Korean subcontractor, whose name it did not
disclose, reportedly made contacts with several Chinese automobile
companies from 2002 and unwittingly passed on test data on engines.

The company's actions were revealed through an investigation that the
Korean car maker conducted from August into 20 subcontractors
following a tip from the Korean National Intelligence Service and
Hyundai Motor's Beijing office.

The subcontractor in question has been involved in developing new
vehicles with Hyundai Motor for 10 years. Prior to this incident, the
company had enjoyed a reputation as being one of the best in the

"The subcontractor introduced a computer program based on Hyundai
Motor data at an electronic industry exhibition held in China and even
made contacts with Chinese automotive companies," said a Hyundai Motor
executive, who declined to be identified. "There is a high possibility
that core data regarding our Sonata and Grandeur have been leaked."  
Hyundai Motor said it has stopped dealing with the subcontractor.

"Not only did the company keep us in the dark about its contacting our
competitors, but also kept vital information that should have been
deleted," said a member of the Hyundai Motor investigation team.  
Although the subcontractor has admitted to keeping the information, it
said it only did so to help boost its own business in future dealings
with Chinese companies.

"Although it's true we made contact with Chinese companies, it was
never our intention to pass on technologies or sell them," said the
subcontractor's president.

Hyundai Motor said it has accepted its erstwhile subcontractor's
explanation that the leak was accidental, and so it has decided
against filing a lawsuit in Korea.

In the same investigation, former employees of another Hyundai Motor
subcontractor were found guilty of trying to sell compact vehicle
technologies to Chinese companies.

The Korean automaker has been aggressively expanding its business in
China since 2001, raising production capacity from 50,000 units in
2002 to 300,000 this year. With the recent introduction of two new
models, Hyundai Motor has emerged as the second-biggest auto seller in
the country after General Motors Corp.

"Recent technology leaks in many cases are not the result of
industrial espionage but just sheer carelessness on the part of
subcontractors or company employees," said Kang Chul-koo at the Korea
Automobile Manufacturers Association. "Of course, any intentional
leaks should face severe punishment to prevent a repetition."

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