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THE ROAD TO SUSTAINABILITY

HYUNDAI MOTOR COMPANY 2002/2003 Sustainability Report

Purpose
This report focuses on corporate social responsibility and corporate citizenship as a step toward sustainability on a global scale. This report sheds light on some of our activities in these areas and welcomes feedback from readers and other stakeholders alike.

Hyundai Motor Company 2002/2003 Sustainability Report

Table of Contents
04 06 08 Chairmans Message Company Profile Vision on Sustainability Sustainability 16 22 32 Environmental Value Social Value Economic Value Sustainability Activities by Department 36 47 50 58 61 R&D Purchasing Production Marketing & Sales Aftermarket Appendix 66 70 71 Environmental Data KPMG Global Sustainability Services Recommendation Contacts

Content
This is our first sustainability report, which expands on last years environmental report, adding social and economic aspects. This report was prepared under the environmental reporting guideline 2003 of the Ministry of Environment, Republic of Korea, Global Reporting Initiative (GRI) sustainability reporting guidelines 2002 and UNEP Mobility Forum guideline for sustainability reports.

Reader
This report is intended for a wide readership customers, employees, analysts, communities, advocacy groups, shareholders and other stakeholders who work with or are impacted by Hyundai Motor.

Scope
This report shows sustainability activities in these key areas of business, including human resources, R&D, purchasing, production, marketing and sales, and aftermarket. This report primarily covers the activities of domestic Hyundai Motor operations unless otherwise indicated in the text. Hyundai Motor subsidiaries and affiliated companies are not mentioned. Major figures of environmental aspects are from the whole period of the 2002 calendar year and information of social and economic activities are from January 2002 ~ August 2003.

Chairmans Message

The Challenge for Sustainable Development


Hyundai Motor has concentrated its efforts on respecting human value and contributing to society through the preservation of the environment, based on corporate citizenship. Those efforts were made substantial through the announcement of the global environmental policy and followed by other activities weve achieved. Hyundai Motor recognizes the environment as a core corporate value to become a global top 5 automaker in overall competitiveness. To put our values and policies into action, we launched a corporate-level environment organization and established a company-wide environment management strategy, created through analyzing the entire corporate value chain. In addition, we broke ground on the Hyundai Eco-technology Research Institute that will lead the way in, among other innovations, the future development of environmentally-friendly vehicles. We are aligning our existing policies and systems with this environment management strategy as well as ethics management to improve our corporate value and our sustainable future. In step with these changes, we are improving other management systems, to balance profit and development, short-and long-term goals, and the triple-bottom line: economy, the environment and society. This report is an important step for us in this process. Through steps like this, we will respond to various social requirements and continue to improve our competitiveness as a company with global presence and to meet stakeholder expectations. As we look toward to the future, we will do our best to enhance quality of life through supplying safer, environmentally-friendlier vehicles and increase the number of channels for proactive communications with stakeholders such as customers, investors, employees, suppliers and NGOs, without compromising the rights of the next generation. All these will lead to mutual respect and cooperative relationships, which are necessary for harmonized society. Meeting these objectives is a responsibility that we share with all of industry, as we

move collectively toward a more sustainable and a more productive future. We look forward to your interest and encouragement. We invite you to be with us as we challenge for the future, the environment and humankind.

Chairman & CEO, Hyundai Motor Company

Mong-Koo Chung

Company Profile (as of Dec. 31, 2002)


Headquarter: Industry sector: Major product: Production capacity: Total assets: Amount of capital: Sales: Net income: R&D expenses: Number of employees: Chairman and CEO: Date of establishment: Seoul, Republic of Korea (231, Yangjae-dong, Seocho-Gu) Manufacturing Automobiles 1.7 million units per year 20, 867 billion Korean won 1,476 billion Korean won 26,337 billion Korean won 1,434 billion Korean won 914 billion Korean won 49,993 Mong-Koo Chung Dec. 29, 1967

Hyundai Motors Environmental History


I. Early Stage 1967 Establishment of HMC 1975 Ulsan Plant completed II. HMC s Indigenous Model Development Stage 1976 Pony launched 1984 Ulsan Testing Ground completed (First Korean comprehensive road test facility) III. Self-supporting Framework Establishment Stage 1985 Pony Excel production facility completed (300,000 units/year capacity) Establishment of Hyundai Motor America (HMA) 1989 Excel, the third generation passenger vehicle, launched IV. Expansion Stage Development of first Korean engine and transmission Development of electric vehicle #1, the pioneer model Development of the lean burn engine (the first high efficiency Korean engine) 1992 Development of the alcohol fuel cell vehicle Development of the electric vehicle #2 1993 Development of the electric vehicle #3 ~ #6 1994 Development of nickel-metal hydrogen fuel cell electric vehicle Development of environmentally-friendly hydrogen-fuel vehicle Development of solar energy vehicle 1991

1995 Development of hybrid electric vehicle (FGV-1) Development of natural gas vehicle (NGV) Simultaneous certification by ISO/DIS 14001/BS7750 (Head Office, Ulsan Plant, Namyang R&D Center, Mabuk R&D Center) for the first time by a Korean automaker 1996 Development of electric vehicle Accent 1997 Clean Vehicle Certification from California Air Resources Board (First Korean electric vehicle to receive certification) 1998 ISO 14001 certification (Asan Plant) 1999 ISO 14001 certification (Jeonju Plant) Development of fuel cell for automobile (First in Korea) Use of lead-free paint 2000 Diesel engine application for passenger vehicle (First in Korea) Development of compressed natural gas (CNG) bus Development of methanol fuel cell electric vehicle (First in Korea) Development of hydrogen fuel cell electric vehicle (First in Korea) 2001 Passenger vehicle Common Rail Direct Injection (CRDi) diesel engine recognized as one of Korea Top 10 New Technologies of 2000 Introduction of fuel cell electric vehicle Santa Fe (First in Korea) 2002 PBEC Environmental Award (Golden Winner) Hydrogen fuel cell electric vehicle stayed the course in 2002 California Fuel Cell Road Rally

Hyundai Motor Company Worldwide


Hyundai Motor Company Head Office U.S.A. HMA / HMFC / HMMA / WMG HATCI / Latin American & Caribbean HQ HYMEX CANADA / HAC JAPAN / HMJ Hyundai Motor Japan R&D Center CHINA Beijing Jingxian Motor Safeguard Service Beijing Hyundai Motor Co. HMC Beijing Office HMC Shanghai Office GERMANY / HME / HYME Hyundai Kia Motor Europe Engineering Center RUSSIA / Moscow Office India / HMI AUSTRALIA / HMCA / Sydney Office TURKEY / HAOS POLAND / HMP HMC Representative office in Poland U.A.E / Africa & Middle East HQ MALAYSIA / Asia & Pacific HQ

Vision on Sustainability
Automobile is no longer a means of simple transportation. It is now a space for reflection, room for friend and family, and even a workspace outside your office. Automobile has become the commodity of necessity: it is indispensable for our lives. What will automobiles mean for us in the future? What will it mean for the environment and society? As a responsible corporate citizen, we commit to contribute to harmonious prosperity of human and the global environs. Hyundai Motor invites the world to join us in our effort toward Sustainability.

Our Vision With the spirit of creative challenge, we are


creating an afuent automotive life for humanity, and contributing to harmony and co-prosperity with shareholders, customers and the other stakeholders of the auto industry.
The spirit of creative challenge, which has paved the way for Hyundai Motors growth, is the core value of Hyundai Motor. It aims for creativity and innovation in order to actively respond to changes in the business environment. Based on this core value, we aim to supply automobiles and related supporting services to enrich the overall quality of human life for both domestic and overseas stakeholders. At the same time, we want to move forward into the future in step with all stakeholders our shareholders, customers, employees, suppliers, dealers and local communities on the basis of mutual trust.

Management Policy
In 2000, Hyundai Motor and Kia Motors merged to form the Hyundai Automotive Group and implemented a horizontal management system in September 25 of that year. The horizontal management system gives departmental teams extensive power to carry out corporate policies and implement their own action plans based on those policies. The horizontal management system is guided by three principles: 1) Trust-Based Management 2) Site-Intensive Management 3) Transparent Management. These principles, together with the environmental policy mentioned later in this report, give direction to the management strategies that drive our business. In 2003, we established four objectives to be met in the mid- to long-term strategies: 1) enhance product value, 2) establish a global production system, 3) increase brand power, 4) improve environmental management systems.
Management Policy

Trust-Based Management respect people productive management-labor relationship trust between superiors and subordinates meet the expectation of society Site-Intensive Management customer satisfaction develop decent workplace and establish management strategy top priority to quality and service Transparent Management transparent job specifications transparent transaction with suppliers fair trade guaranteeing mutual benefit pride as a respected company

2003 Management Policy


In order to realize Hyundai Motors management value of the co-development of human society, it is essential to systematically and actively prepare our response to the ever-changing business environment, focused on trust-based management, site-intensive management and transparent management. Therefore, in 2003 Hyundai Motor prepared a management policy reflecting the social requirements for improved business transparency, and higher ethical and environmental standards for all employees to share and practice.

First, by raising the standards of every aspect of the company to the global level, Hyundai Motor will secure competitive power in the global market and use its overseas production plants as a foundation to reach out into the global market. Second, Hyundai Motor plans to improve its management system to ensure a continuous flow of profits, by cutting excessive costs to maximize profits while investing in promising business areas. Focusing on core competencies will also help to minimize the impact of the unstable business environment on the company and enhance competitive power in the future. Third, through building trust with its employees based on humanism, Hyundai Motor will build the Great Workplace to raise the quality of its employees lives. Last, Hyundai Motor will assume its responsibilities as a corporate citizen, building an environmentallyfriendly management foundation and heightening the sense of ethical awareness throughout the company. As a major player in the automotive industry and a company which is a major engine of growth for the domestic economy, Hyundai Motor strives to go beyond its economic responsibilities and to fulfill higher standards of social responsibility as a member of the local community and of society as a whole.

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Hyundai Motor Company 2002/2003 Sustainability Report

Toward Sustainable Society


Revision of Modern Development Model Civilization has modernized itself with the help of science. It has achieved economic growth, but also presented problems such as environmental pollution, resource exhaustion, human rights abuses, labor problems and unfair trade. These features, which once were recognized as non-fundamental issues, are now being recognized as serious threats to the sustainable development of our world and the planet we bequeath to our descendants. There have been a multitude of forums such as the World Summit on Sustainable Development in Johannesburg, which dealt with these issues reconsidering the quantitative, growth-oriented modern development model. These days, all aspects of human activities are reformed for Sustainable Development. 21st Century Development Model: Sustainable Society Sustainable Society is the new socio-economic model for the 21st century, the core objectives of which consist of affluent prosperity and harmony among global citizens and future generations, without neglecting their rights.
21st Century Development Model: Sustainable Society

Hyundai Motor and Sustainability


Sustainability is the underlying value of Hyundai Motors vision to accomplish corporate social responsibility based on global corporate citizenship. Hyundai Motor strives to realize sustainable development by establishing and conforming to an ethics charter and environmental policy based on an already existing vision to maximize environmental, social and economic contribution. The ethics charter and ethics code of conduct represent Hyundai Motors will for corporate citizenship. The global environmental policy is our commitment to social contribution. Ethics Charter The Hyundai Motor ethics charter and ethics management program, both introduced in 2001, combine the ethical, social, economic and legal framework by which employees are expected to adhere to in all aspects of business. The charter consists of five large categories with detailed components in each category. Our commitment to ethical management and transparent management was iterated in our chairmans annual message in January 2003 and again in a letter sent to all 2,500 suppliers who work with us.
Ethics Charter

Environment Protection

Social Contribution

Economic Growth

Corporate Citizenship
(The Sprit of Challenge, Ethics Management)

Sustainable Society

Enroot Transparent Management Doing business with transparent standards Resist bribery and improper gain Establish Partnership with Suppliers Support suppliers in technological innovations Fair trade Respect Humans, Human Resource Management Respect all employees Promote employee ethics awareness Human resource management

Enhance Customer and Shareholder Rights Provide excellent products and services Protect customer information Customer relations management Enhance shareholder assets through maximization of management efficiency Contribute to Society Contribute to national economic development Comply with environmental regulations Participate in philanthropic activities

Environmental Vision, Philosophy and Global Environmental Policy Hyundai Motor has declared the following environmental vision, philosophy and policy to achieve sustainable development.

Corporate Social Responsibility Corporate Citizenship is fundamental to business activities that fulfill environmental, social and economic responsibilities. 1) Environmental Responsibility: minimize the environmental impact we have over all of our business activities; maximize efficiency of resource use; and create a better environment for future generations. 2) Social Responsibility: have respect for the value and interest of our stakeholders, including but not limited to shareholders, customers, employees, suppliers and local communities. 3) Economic Responsibility: conduct business in a fair manner; corporate governance should be reasonable; management practices should be fair and transparent; and the responsibility for management performance should be shared.

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Sustainability
A company with a humanitarian spirit. A company that cares for our environmental future. A society in which people, corporations and the environment coexist. Hyundai Motor is preparing for the vision of sustainability.

Hyundai Motor Company 2002/2003 Sustainability Report

Environmental Value
1. ECO GT5 2010
In June 2003, Chairman Mong-Koo Chung declared Global ECO GT5 2010. Hyundai Motor aims to rank among the worlds top five automakers by 2010 in terms of sales, corporate social responsibility and environmental performance. This ambitious initiative calls for Hyundai Motor to actively respond to environmental issues and transform itself into a model of corporate sustainability. Hyundai Motor will devise and implement systematic environmental management strategies, designating key tasks as follows: establish an environmentally-friendly product development system to meet regulatory requirements and strengthen environmental performance of its products; reduce pollutants and improve the clean production system through green purchasing; and establish an environmentally-friendly system for marketing, sales and aftermarket. In addition, Hyundai Motor will accelerate development and commercialization of next-generation environmentally-friendly vehicles such as hybrid electric vehicles and fuel cell electric vehicles. Moreover, Hyundai Motor will strive to develop more recyclable and easily dismantlable components to contribute to the conservation of natural resources and the environment.

3. Environmental Management Strategy


Hyundai Motor improved its existing environmental management strategy by broadening responsibilities in environmental protection and actively responding to a rapidly changing sustainable world economy. The strategy covers all major areas of business, including the following corporate value chain: R&D, purchasing, production, marketing and sales, aftermarket, finance and accounting. This is part of a larger objective to join the top 5 global automakers by 2010.
Environmental Targets by Department

Policy Recognize the environment as a core element of business and create corporate value by proactively pursuing environmental management.

Strategy Integrate environmental management with the existing business strategy to strengthen corporate capacity Set up corporate environmental organization

Results (Jan. 2002 ~ Aug. 2003) Established mid-long term environmental management strategy (Dec. 2002) Organized environmental committee (jun. 2003) Organized environmental management strategy planning team in corporate planning office (Jan. 2003) Established Hyundai Eco-technology Research Institute (Jul. 2003) Organized Marketing/Sales Subcommittee, A/S Subcommittee Customer Satisfaction Survey Organized environmental accounting subcommittee Environmental accounting pilot project (supported by Ministry of Environment (Jul 2002-Apr. 2003) To be implemented from 2004 Developed hybrid electric vehicle Developed fuel cell electric vehicle Developed gasoline direct injection engine Developed VGT diesel engine Developed low emission vehicle Developed low emission catalyst Developed air-purifying radiator Developed low pollution post-product equipment for diesel vehicle Evaluation software for recycling (RAIS) Distributed ELV dismantling manual Developed parts recycling technology Introduced pilot ELV disassembly plant Replaced ARP wash zone type Recovering Boiler Waste Heat Electro-deposition de-ionized wash water recycling Installation of hydraulic oil filter Environmentally-friendly packaging Implementation of chemical management system ISO 14001 Certification in HMI Collective logistics system Environmental training Supplier environmental management training Support suppliers for ISO 14001 certification SCEM project Set up tripartite coorporation model among governmententerprise-NGO Boong Boong Yi Painting Contest Milk donation Activities for the physically challenged Launched environmental report (Nov. 2002) Launched sustainability report (Dec. 2003) HMC & KMC environmental forum (Nov. 2002) Set up Environment, Health & Safety Information System (Dec. 2003) Disclosed environmental performance through road show Set up corporate standard stronger than environmental regulations Participate in government pilot projects (SCEM, CMS, ER, EA Guideline)

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Establish green marketing, sales, service system

Efficient investment management via environmental accounting

companies must be more proactive in assuming responsibility for environmental conservation. with voluntary response to the challenge of environmental issues. ..living in harmony with the environment is our new goal.
- Quoted from Global ECO GT5 2010 declaration Chairman Mong-Koo Chung, June 2, 2003.
Chairman Mong-Koo Chung declaring the ECO GT5 2010 Initiative.

Develop and operate environmental KPI Promote the development and distribution of environmentally-friendly products. Develop and produce next generation vehicle Achieve improved fuel efficiency target Reduce exhaust emission

Increase recycling rate and establish DfE System

2. Environmental Organization
For the implementation of the environmental policy, Hyundai Motor organized a corporate-level environmental committee. The committee, led by the chairman, is comprised of three independent committees: the environmental management committee, the environmental production committee and the environmental product committee. The committees work together with support from subcommittees to establish corporate-wide and department-specific targets and action plans based on the environmental policy. Details for the activities done by each sub-committee can be found in the latter part of this report.
Dedicate to reducing pollutants and to preserving resources and energy for sustainable use at all stages of our products life cycle, from development to production, sales, use and disposal. Endeavor to provide all employees with environmental training programs, support suppliers in environmental management and contribute to public welfare. Develop cleaner production technology for low pollution, low cost and high efficiency Reduce, recycle and reuse waste Establish overall material management system ISO 14001 management Introduction green logistics management system Enhance awareness among employees about environmental production Support suppliers in their environmental management Set up coorporation system with stakeholders on the environment Engaging activities for social contribution

Environmental Committees

Comply with all international and national environmental regulations and agreements. Continue to improve the environmental management and publicly disclose our performance.

Cooperation with stakeholders via environmental information disclosure

Environmental management IR Strive to go beyond compliance in environmental regulations and agreements Cooperate with the government in developing environmental laws and policies

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4. Climate Change
Due to rapid economic growth and globalization, the world has been experiencing a drastic increase in the demand for various means of transportation such as automobiles, commercial jets and freight ships. The increase in the demand for such means of transportation intensified the use of fossil fuels, resulting in high emissions of CO2 gas, a major source of global warming. As a signatory to UNFCC, Korean government and the industries are actively participating in the effort to reduce CO2 emissions. Through Korea Automobile Manufacturers Association (KAMA), Hyundai Motor made a voluntary agreement with EU to reduce CO2 emissions to 140g/km by 2009. To comply with this agreement, Hyundai Motor is developing high fuel-efficiency vehicles and next generation vehicles such as hybrid and fuel cell electric vehicles. Next Generation Vehicle The amount of CO2 emitted from automobiles has an inverse relationship with fuel efficiency. Automakers are attempting to improve the performance of internal combustion engines and to develop next generation vehicles. Hyundai Motor has been developing environmentally-friendly vehicle from the early 1990s. Through the electric vehicle development project, Hyundai Motor accumulated technology in electric power and vehicle energy management, which are widely used in development of hybrid electric vehicles and fuel cell electric vehicles. Nowadays, hybrid electric vehicles and fuel cell electric vehicles are two of the most highlighted trends worldwide. They are truly environmentally-friendly vehicles in terms of fuel efficiency and emission reduction. Hybrid, which means mixture or complex, is the intermediate stage for developing fuel cell electric vehicles. The hybrid electric vehicle combines merits of internal combustion engine and electric vehicle to achieve high fuel-efficiency and emission reduction. The fossil fuel depletion issue and environmental problems led to the development of the hybrid electric vehicle. Meanwhile, the fuel cell, which is an electro-chemical device, directly produces electricity by reacting hydrogen with oxygen in the air, without the combustion process. The fuel cell electric vehicle achieves the same level of emission performance and silence as the electric vehicle and better fuel efficiency than the hybrid
The enhancement of the driving distance on a single charge of fuel is the key technology for the fuel cell electric vehicle. We have to develop high-pressure hydrogen storage technology. We developed high-pressure hydrogen tank containing 350-bar in June 2001 for the first time in the world and now we are in the process of developing a 700-bar storage tank. The Santa Fe hydrogen fuel cell electric vehicle is installed with technologies that guarantee hydrogen safety mechanically and electrically. The Santa Fe hydrogen fuel cell electric vehicle mounted with high-pressure hydrogen storage tank for the first time in the world in December 2001.

electric vehicle. In addition, major automakers around the world are declaring commercialization of fuel cell electric vehicles as a main management strategy for the 21st century, followed by a huge investment. In line with the international trend, Hyundai Motor is actively stepping forward for the development and commercialization of the fuel cell electric vehicle, which has the same implication as that of the internal combustion engine vehicle in the 20th century. Individual behavior is the beginning of the solution to the global warming problem. With this in mind, many employees in Hyundai Motor are commuting by shuttle bus. We operate 155 lines in Korea as follows:
Number of Shuttle Bus Service Routes (Monthly Average for 2003) Area Head quarter Namyang R&D Ulsan plant Asan plant Jeonju plant Total Routes 34 82 10 23 6 155

Communication with Investors Hyundai Motor communicates its environmental management targets and performance to stakeholders via road show presentations. Important road show presentations in 2003 are as follows:
February 2003: March 2003: April 2003: May 2003: May 2003: June 2003: August 2003: Non-deal road show (Asia/Europe/USA) CSFB Asia Investment Conference (Hong Kong) Explanations for Investors hosted by UBS securities (USA) First quarter result presentation (Korea Stock Exchange) Samsung Investment forum for domestic investors Overseas road show sponsored by Federation of Korean Industries (New York/Boston/London) First half Investor Relations (Korea Stock Exchange)

The environmental management performance of Hyundai Motor is highly evaluated by international investment banking initiatives. We are listed on a major Korean sustainability fund (Samsung Eco Fund) as an environmentally-friendly company, for our commitment to protect the environment and for reporting our performance to investors and other stakeholders. Since the issuance of the Eco Fund on 16th August 2001, Hyundai Motor has continued the effort in investor relations to communicate with investors on our environmental and social performance. Environmental Accounting System We have been working with the Korean Ministry of Environment since 2001 on a pilot environmental accounting program that recognizes and quantifies environmental costs for decision makers and stakeholders. We are currently at the stage of identifying environmental expenditure and plan to report the results in our 2004 sustainability report.
Environmental Expenditure (2002)

electric vehicle. In comparison to the internal combustion vehicle, it achieves the same level of fuel supply convenience and drive performance. With hydrogen as fuel, it emits nothing but water. The fuel cell electric vehicle is expected to reduce environmental pollution and fossil fuel consumption when it is commercialized. Hyundai Motor developed Elantra hybrid electric vehicle in 1999 and Verna hybrid electric vehicle in 2000. Also, we pilot serviced County hybrid electric bus during the World Cup in 2002. There are many technical and economic barriers to commercialize the fuel cell electric vehicle. Its commercialization has a direct relationship with national energy management strategy as well as environmental preservation. Furthermore, it has a monumental impact on industries as a whole. Therefore, governments in many developed countries are increasing support for relevant research and development of the fuel cell

Classfication Social Environment Investment Cost Waste Treatment / Recycling Cost Environmental Risk Management Cost Environmental Pollution Reduction (Indirect Cost) Environmental Pollution Reduction (Direct Cost) Recycling Revenue

Expense (Million Korean won) 13,455 9,872 800 1,721 32,506 33,713

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INTERVIEW >>>
5. Awards and Certifications
PBEC Environmental Award Hyundai Motor was the first automaker selected as a golden winner at the Pacific Basin Economic Council (PBEC) Environmental Awards in 2002. We were awarded for our achievement in establishing production processes such as energy management through corporate environment conservation project, management of air/water pollutants, waste management, hazardous chemical management, and our environmental performance, which is about 1/10th of the limit allowed in regulation. We were also honored for total recycle of wastewater, development of clean technology, environmentally-friendly product development, like alternative fuel system, recycling systems, fuel cell electric vehicles and environmentally-friendly materials. Our management was also honored for its systematic environmental efforts and policy set up, continuous internal audits, etc. PBEC was established in 1967 for mutual cooperation and regional development of Pacific Rim countries. Twenty member states such as Korea, USA, China, Japan and Russia set the environmental award and select winners for gold, silver Hyundai Motor Receives Gold Level PBEC Environmental Award. and bronze annually. Certification All domestic Hyundai Motor plants are ISO 14001 certified and designated as environmentally-friendly company by Korean Ministry of Environment. In addition, both Asan and Jeonju plants are KOSHA 2000 and OHSAS 18001 certified.
Certificates by Facility

Strategic approach toward social contribution and environmental performance will be taken as a next step to develop the foundation for sustainability in Hyundai Motor.
Soon-Chul Choi Senior Vice President Corporate Planning Office

Q: Please tell us about the sustainability that Hyundai Motor envisions. Hyundai Motor recognizes sustainability as a new social paradigm. We dedicate ourselves to our commercial success on one hand and to a high level of environmental performance and social contribution on the other. To implement sustainability as a core value of Hyundai Motor, we will integrate all of the sustainable performances pertaining to environmental management, ethics management, employee-welfare and social contribution into our sustainable management. We will continuously improve and systemize our sustainable management strategy for quality performance. Q: Please tell us about the impact of the sustainability issue on the automotive sector. The sustainability issue in the automotive sector has an immanent impact: it can directly influence the global economy and the environment. Particularly, issues on the production and R&D of environmentallyfriendly vehicles and solutions to vehicle safety and traffic congestion are more urgent concerns in sustainability. Hyundai Motor will do its best to meet the social needs and fulfill our social responsibility as an accountable corporate citizen.

Q: Please tell us about Hyundai Motors Environ mental Management Strategy. As one of the key management strategies, the environmental management strategy of Hyundai Motor covers the entire value chain, including R&D, purchasing, production, sales and after-sales. We believe that environmental management is a critical factor in meeting the global and regional environmental regulations and the social needs for sustainable development. Ultimately, Hyundai Motor aims to become one of the global top 5 automotive companies by 2010. Q: Please tell us about Hyundai Motors mid- to long-term environmental plans. In this year, we are focusing on developing the internal environmental infrastructures, such as Hyundai EcoTechnology Research Institute, and restructuring the internal environmental organization. Strategic approach toward social contribution and environmental performance will be taken as a next step to develop the foundation for sustainability in Hyundai Motor.

Plant Ulsan Asan

Certification MOE Designated Environmentally-Friendly Company : 1996, 1999, 2003 ISO 14001 : 1995 MOE Designated Environmentally-Friendly Company : 1998, 2001 ISO 14001 : 1998 KOSHA 2000 : 2000

Jeonju

MOE Designated Environmentally-Friendly Company : 1999, 2003 ISO 14001 : 1999 KOSHA 2000 : 2002 OHSAS 18001 : 2002

HMI

ISO 14001 2003

ISO 14001 : Headquarter, Ulsan, Namyang R&D, A/S

Environmentally-Frien dly Company Certification : Ulsan

ISO 14001 : Asan

ISO 14001 : Jeonju

ISO 14001 : HMI

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Social Value
We create harmony among shareholders, customers and other stakeholders to enrich the lives of all. Hyundai Motor pursues social value through mobility that enriches the lives of all. Through product and business activities, we are devoted to achieving harmony among stakeholders.

1. Employees as Vital Partners


Human Resources Development Hyundai Motors human resources management can be divided into 4 areas; HR, labor, welfare and education. For each area, we are implementing human resource management efficiently and reasonably based on respective action plans. Efforts are made to compensate employees based fairly on performance and to not discriminate against employees. Employees opinions on the HR management system are collected in various ways and reflected to improve the system. Working Hours and Leave System Average overtime hours for production workers recorded in 2002 were 860.4 hours, which were subject to an overtime payment at 150 to 350 percent of normal hourly wages. A full-time employee worked an average of 42 hours per week in 2002, which was reduced to 40 hours per week in concordance with an agreement reached with labor union in August 2003. Hyundai Motor presently follows a nationally endorsed leave system whereby employees are given one day of paid leave per month. Hyundai Motor grants one day of paid leave for each year offer an initial year of consecutive employment year, in addition to annual paid leaves. We also follow relevant labor acts and labor agreements in additional paid leave days, including a summer vacation period, 4 days of paid leave during national holidays such as lunar New Years Day and Chuseok respectively, and a vacation bonus. Female employees receive an additional day of paid leave per month and are eligible for 90 days maternity leave during and following pregnancy.

UNEP Mobility Forum One of the ways we communicate with stakeholders, including 12 automakers and NGOs, is by attending meetings of the United Nations Environment Programme (UNEP) Mobility Forum since 2001 to share our thoughts on sustainability issues in the transport sector. Main issues for discussion are development of sustainability reporting guidelines in the auto sector and cooperation to commercialize environmentally -friendly vehicles.

Female Employees As of the end of 2002, the total number of employees stood at 49,993 with female employees accounting for 4.3 percent. Women at Hyundai Motor are fulfilling their career goals in various departments and Hyundai Motor will continue to respect the importance of female employees.

Sustainable mobility is about balancing the needs of society to allow for free and cost effective movement of people, goods and services and preserve a healthy environment capable of sustaining life for current and future generations. Achieving this balance is a complex and compelling challenge; one that requires continuous dialogue and coordinated action from all relevant stakeholders, including governments, industry, and environmental and consumer groups. Facilitating this dialogue and cooperation is the basis of the UNEP Mobility Forum-a voluntary initiative of 13 automotive manufactures from Europe, Asia and the United States, and one supplier, working jointly with UNEP to protect the environment while maintaining healthy and profitable businesses operating within the framework of sustainable development. (Excerpt from Getting There , UNEP Mobility Forum)
Female Employees

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Employee Welfare Program Hyundai Motor provides an employee benefits package including medical examinations and various welfare programs to contribute to our employees quality of life, and have them be confident to be a member of the Hyundai Motor family. Medical Welfare Employees of Hyundai Motor in Korea receive regular medical examinations including oriental medical diagnosis, for the first time in Korea - once every two years for office workers and once every year for production workers. The families of the employees receive subsidies for medical services. A total of 9,633 employees over the age of 40 and their families received complete medical examinations sponsored by Hyundai Motor at a cost of 1.1 billion Korean won. In partnership with OnlineMed, Hyundai Motor offers an online medical diagnosis and information site on its corporate intranet system, accessible anytime by employees throughout the company.

Industrial Accident Compensation Insurance While trying to reduce the frequency and severity of workplace injuries and illnesses, Hyundai Motor tries to act fairly and quickly when one does occur. In agreement with the Korea Labor Welfare Corporation (KLWC) and its related acts, Hyundai Motor compensates 20 percent of the average salary while KLWC assumes 70 percent, Hyundai Motor pays the bonus to employees on leave due to industrial accidents. The cost of medical treatment is paid by KWLC. Employment Insurance Through an employment insurance policy, Hyundai Motor cooperates with government in providing employment security and compensation in the event of non-voluntary unemployment. The cost of insurance is evenly divided between company and employee, each paying 50 percent of the premium. Housing Loans Hyundai Motor offers mortgages at below market rates. Employees can receive housing loans from 5 to 15 million Korean won for a period of 5 to 15 years at an interest rate of 2 percent APR. The company also offers its employees company housing, apartments and dormitories. Employee Stock Ownership The employee shareholder program gives priority to employees if they decide to purchase company shares. The program also earmarks up to 20 percent of total public subscriptions to be made available to low-income and long-term employees. The association has offices at Seoul headquarters and in Ulsan plant. Employee Clubs

Oriental Medical Diagnosis Hyundai Motor recognizes oriental medical diagnosis in its medical benefits package, the first company to do so in Korea. As a result, employees at our company can receive a wide range of medical welfare.

Online Medical Diagnosis Hyundai Motor operates an online medical diagnosis center in cooperation with OnlineMed Co. of Korea. Employees can use the Hyundai Motors intranet, Autoway, to access the system for fast and convenient medical information.

We encourage and support employee clubs that bring people together and create strong bonds in the workplace. The company subsidizes their activities up to 50 percent of their operating budget for the club with more than 15 members (30 members at production plants). Departmental Meeting The company promotes friendship across administrative units, for example by offering departments with 4,000~9,000 Korean won per person a month for friendship gatherings. Leisure Activities The company provides facilities for employees various leisure activities in their off-work days, such as a weekend farm, a cultural center and a country pension house for employees.

National Health Insurance Hyundai Motor and its employees each pay 3.63 percent of a standard monthly salary toward National Health Insurance. National Pension Fund In pursuant to the National Pension Act, a full-time employee is required to pay 9 percent of his or her standard monthly salary into the pension fund, of which Hyundai Motor bears fifty percent (4.5 percent of a standard monthly salary) of the payment. Private Pension Fund The company pays 20,000 Korean won per month for each employee toward a private pension fund for 10 years from the date of subscription. Employees are also eligible for a tax benefit of 40 percent against their yearly insurance premiums.

Employee Night-out

Internet Club Festival

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Hyundai Motor Company 2002/2003 Sustainability Report

Education Employee training programs are the key component of our human resource development plan. Hyundai Motor provides a number of training programs to enhance the capabilities of employees within the organization and to improve individual aptitude in performing their assignments. Our effort on educating people extends beyond our own employees to include their families. Hyundai Motor offers education through programs for our employees families. Human Resources Policy
Training Hour Per Capita
Hour 120 100 80 60 40 20 0 98 99 00 01 02 Year

Cyber Ethics Education Hyundai Motor has adopted ethics management to fulfill its corporate dues such as economical, legal, social and ethical responsibilities. For efficient implementation, Hyundai Motor introduced an ethics management system and has introduced the Ethics Management Specialist Education Program. Hyundai Motor regularly invites its employees to participate in ethical management forums with external instructors. A total of 6,330 Hyundai Motor employees have participated in the forums. Hyundai Education Management Introduction System (HEMIS) HEMIS is an online portal site made accessible for Hyundai Motor employees. It contains overall training related information such as annual training procedure and program summaries. (http://hemis.hyundai-motor.com) Health & Safety Hyundai Motor continues its support for accident prevention and health & safety improvement measures. At production lines, all employees are required to participate in mandatory Health & Safety training for 2 hours a month as stipulated by local regulation. We publish weekly safety news and safety handbooks to further stress the importance of on-the-job safety. In the year 2002, 23,388 employees (total 496 hours, 273 classes) completed the health education program on ergonomics, diabetes, high-blood pressure and obesity.

Cyber Ethics Education

Hyundai Motor has established a new, more progressive human resource policy. Under the motto, Continuous Learning, Spirit of Challenge and Public Service, Hyundai Motor provides its employees with the tools and training for self-development and maximizing individual potential while helping the company achieve our goal of reaching the global top 5 by 2010. The training emphasizes each employees professional knowledge, spirit of challenge and serving customers with a sense of responsibility to the community.

HEMIS

Education System Education programs are job-specific and function oriented. They are categorized in 4 larger divisions in general management, production, sales and repair. Education Process Each education program is executed in a step-by-step process. The 3-step education process is made of; assessment stage, implementation stage and evaluation stage. The evaluation stage allows us to improve our human resources development programs through scoring individual job performances.
3-Step Education Development Assessment phase Implementation phase Evaluation phase Ergonomics Training

Course Development Process Education Requirements Survey Clarification of education purpose Course Development

Education Diversity Education Method Education Operation System Application

Performance Measurement Four-Step Evaluation Diversity Evaluation Method

Industrial Accidents In 2002, there were 513 injuries and 11 fatalities at Hyundai Motor. The accident rate for the year was 1.06 percent, lower than the industry average of 1.22 percent and the automobile industry average of 1.15 percent.

Human Resource Development Plan


Present Utilization Basic Competence Generalist Basic Requirement as a Member of HMC Common Learning Track Per Position/Grade Consistency with Strategy CEO Strategy Seminar New Manager Course New General Manager Course New Deputy General Manager Course E-Learning OES Course Job Competence Development Course New Recruit Course Engineer/4 Grade Course Change Management Education Future Preparation Core Competence Future Value Leader Core Human Resource

Industrial Accident Rate

Job Competence Specialist Job Specialist Optional Learning Track Self-Leading Learning Program Development of Employability Management Reading Club Foreign Language Course Cyber Education(System) Globalization Education 6 Sigma Education Career Development Education Digitalized Information Education Quality/Productivity Improvement Job Competence Development Training

Manufacturing

Manufacturing

Manufacturing

Auto Industry

Auto Industry

Auto Industry

Hyundai Motor

Advanced Learning Track

Hyundai Motor

Hyundai Motor

Tailor made Learning Program Value Creation for Future Organization Management Coaching CEO Course Global Management Course Management Outsourcing Studying/Training abroad HMC MBA Course

*The industrial accident rate has increased in the year 2002. It is due to a revision in the definition of industrial accident in the Industrial Safety and Health Act, 2002.

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Hyundai Motor Company 2002/2003 Sustainability Report

Employee Relations Dialogues with Employee Hyundai Motor holds regular employee meetings to present corporate management strategies and business performance expectations. The official employee meeting is held quarterly with the union while non-routine employee meetings are held on need basis. In the first half of 2003, our production facility in Ulsan held 10 employee meetings. We take these opportunities to ask employees how they feel about the effectiveness of management-employee communication. According to one poll, 77.1 percent of employees were satisfied with the level of information sharing between management and employees, compared to 47.5 percent satisfaction before the meeting was held. A total of 83.4 percent of respondents answered that the briefings helped them to understand the direction of management strategy and 91.3 percent answered that they would share with subordinates what they learned at the briefings. Employee meetings establish the foundation for improving management-employee relationship. Event for Employees We organize a number of events for employees and their families, including love and respect your parents event, the Cherry Blossom Festival at the Ulsan plant and annual sports competitions. Such events help bring our employees together and help create bonds between labor and management.
Love and Respect Your Parents Event We have been hosting this event at Asan plant, Ulsan plant and Seoul headquarters. In 2002, we had 20 separate events, with 8,450 people participating.

2. Social Contribution
Social Contribution Committee (SCC) We operate the Social Contribution Committee chaired by the CEO. The committee plans, performs and evaluates all activities related to social contribution. The SCC is expanding its scope of work and conducts various environmental activities including migratory bird protection, local streams clean up and sponsoring various NGO activities.
Social Contribution Committee

Cherry Blossom Festival Ulsan assembly plant holds a cherry blossom festival for employees, employee families and local communities each spring. The event has become a local event for families who come to watch the blossoms on some 300 cherry trees within our facility.

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Hyundai Motor Company 2002/2003 Sustainability Report

3. Customer Safety
1 . 2 .

Hyundai Motor recognizes assurance of driver, passenger and pedestrian safety as the key element for our social responsibility. We are developing Advanced Safety Vehicle (ASV) system, which can be characterized by the use of artificial intelligence. Getz, a small-sized passenger vehicle equipped with Frontal Crash ASV system, scored top rating in the Euro New Car Assessment Program (NCAP). In line with such technical advancements, Hyundai Motor is engaged in safety promotion programs such as Junior Traffic Safety Campaign.
5 .

3 .
1. 2. 3. 4. 5.

4.
A Cultural Event at Seoul Headquarter Hyundai Motor as an UN Supporter Matrix Modified for The Physically Challenged Fundraiser for the Misfortuned Members of Society Donation of School Bus to Elementary School ; HMI

Advanced Safety Vehicle (ASV) Hyundai Motor is planning to complete the development of the core technology in ASV by 2010. The ASV system could reduce the traffic accident rate by as much as 50 percent. We are looking to lead the world in the field of intelligent vehicle. Strategic product development for Safety adaptive cruise control system environment recognition system pre-safe system night vision system parking assist system

Cultural Events Since 2001, Hyundai Motor has presented monthly cultural programs in performing arts at the 800-seat concert hall located at Seoul headquarters. We have been inviting our employees, employee families as well as the community. Global Activities As an official supporter of the UN and a member of the global village, Hyundai Motor provides aid to the disadvantaged members of the world. We have long been engaged in a variety of activities to help the disadvantaged members of the world. We organized field trips for children living in remote and often underprivileged areas. At the Hyundai Motor tour, the children learn more about our operations, discover the science behind automobile production and have fun. Activities for the Physically Challenged We recently purchased 3,000 wheelchairs from the American Wheelchair Foundation and donated them to the South Korean Red Cross. The wheelchairs were delivered to the elderly, the physically challenged with low income and small-scale infirmaries in remote regions. Hyundai Motor produces vehicles including Getz, Accent, Elantra, Sonata, XG, Matrix and H-1 for physically challenged drivers. Regional Activities Hyundai Motor supports those who have suffered through natural disasters as well as the economically challenged, by the means of donation. We worked closely with the government-operated donation organization, Community Chest of Korea, not only to continue its donation effort but also to advance it to the next level. Hyundai Motor donated 2 billion Korean won to the bereaved in the Daegu subway conflagration in February 2003. In addition, we provided hearses, memorial chrysanthemums and funeral services, including 1,500 volunteer workers from 100 Hyundai Motor regional offices and dealerships in the region. In November of 2002, we donated 1 litre of milk to a childrens advocacy group for every passenger vehicle, recreational vehicle and commercial vehicle (under 2.5 tons) that we sold. We delivered 60 thousand litres of milk to 15 thousand children across the country. Research & Development Programs Hyundai Motor established a number of research & development programs with its major suppliers to co-develop and exchange information on new technologies. Also, Hyundai Motor selected academic institutes, to fund and to donate laboratory equipment. We will continue in our support to benefit the field of R&D for our industry. Junior Traffic Safety Campaign Hyundai Motor sponsors the Junior Traffic Safety Campaign together with a safety advocacy group in Korea. At 27 sales centers around the country, we provide comprehensive, free education programs on improving child occupant safety.
Junior Traffic Safety Campaign

Multipurpose Test Track Hyundai Motor is building a test track in the Mojave Desert, 160 km outside of Los Angeles, California. It is targeted to complete in May 2004. It will be 10 times larger than any of our three domestic test tracks and will be equipped with a multi-purpose test driveway including overthrow test of which 3.7 km segment has 8 percent maximum slope.

ASV Product Development

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Road Condition Sensor Magnetic Sensor Vehicle Distance Sensor Forward Obstacle Sensor Blind Spot Monitoring Camera Drive Recorder Side Obstacle Sensor Air Pressure Sensor In-side Door Lock/Unlock Rear Obstacle Sensor GPS Sensor Airbag Road-to-Vehicle/Vehicle-toVehicle Communication System 14. Rear View Camera 15. Water Repelling Wind Shield

16. Seat-belt Pre-tensioner 17. Driver Monitoring Sensor 18. Head-Up Display 19. Steering Angle Sensor 20.Electronic Control Throttle 21. Electronic Control Brake 22. Fire Detection Sensor 23. Vehicle Speed, Acceleration Sensor 24. Collision Detection Sensor 25. Pedestrian Collision Injury Reduction Structure 26. Electronic Control Steering 27. Message Display System 28. Hands-free System

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Hyundai Motor Company 2002/2003 Sustainability Report

Economic Value
1. Economic impact
The automotive industry has a significant impact on regional and global economies, particularly considering its influence on other major industries such as manufacturing, transportation and energy. According to UNEP Auto Sector Report of 2002, one job in the auto sector influences 7 to 10 jobs in other sectors. Some 1.5 million people in Korea were employed in automotive Total Workforce in Auto-Related Industries in and automotive-related industries in 2001. This figure can be Korea (National Statistical Office, 2001) broken down into major sectors: 704,000 in transport and usage, Auto Manufacturing 234,000 257,000 in logistics, 234,000 in auto manufacturing, 214,000 in Raw Material 78,000 Transport, Usage 704,000 auto sales and repair, and 78,000 in material production. In Logistics, Etc., 257,000 2002, Hyundai Motor accounted for some 49.5 percent of the Auto Sales, Repair 214,000 Total 1,487,000 domestic market, making Hyundai vehicles the most driven passenger vehicles in Korea and making Hyundai the most powerful automobile brand in the country. This means that Hyundai Motor impacts a large proportion of the 1.5 million people who work in related industries, not including the millions of people who use our products. As a major exporter in this country, Hyundai Motor also exerts a considerable influence on the regional economy. Value Advanced Automotive Trade Zone (VAATZ) Procurement System VAATZ is Hyundai Motors e-marketplace that streamlines the entire procurement process. It promotes transparency through open bidding and creates an environment for competitive pricing through reverse auction. By linking suppliers with Hyundai Motor and Kia Motors, VAATZ leverages our collective buying power. It also helps suppliers to be more competitive and profitable, by allowing them to voluntarily reduce costs, rather than accept forced cost reductions.

VAATZ Homepage

4. Financial performance
2002 Financial Highlights Sales Net income Total assets Amount of capital 26,337 billion Korean won 1,443 billion Korean won 20, 867 billion Korean won 1,476 billion Korean won
Sales
Korean Won in billions,

Net Income
Korean Won in billions,

Total Assets
Korean Won in billions,

2. Corporate Governance
In 2000, Hyundai Motor was separated from former Hyundai group and became an independent auto specialized company. The board of directors at Hyundai Motor is comprised of 4 internal and 4 external directors. Our internal directors come from major shareholders, including Hyundai MOBIS and DaimlerChrysler. Our external directors come from diverse backgrounds: a retired professor, a lawyer, a tax officer and a Mitsubishi representative.

2002 Export sales by region North America 478,178 units (51.5%) Europe 252,260 units (27%) South Africa and the Middle East 80,514 units (8.5%) Asia Pacific 58,756 units (6.5%) Central and South America 59,422 (6.5%)

3. Transparency and Fairness


Compliance Program for Fair Trade Hyundai Motor is working toward a more transparent management of its business through the implementation of some key initiatives: Hyundai Motor and its 18 domestic affiliates implemented a regulation Compliance Program (CP) in 2002. At the corporate level, we promote transparent management, fair trade compliance announcements and fair trade compliance for our affiliates. We monitor the progress of our fair trade effort through non-fair trading prevention program. Cyber Audit Office The Hyundai Motor cyber audit office, part of our ethics management initiative, presents our ethics charter and business principles on the web, giving employees clear standards to help Cyber Audit Office them make the right decisions at work. Since April 2002 we have been operating a cyber reporting center on the website to report illegal or unfair practices and suggestions for management. These reports are fed back to management and reporters are informed of the results. To mitigate future risks and to improve related systems, we are planning to develop a PR program that outlines our performance with respect to ethics management.

5. Shareholders
Shareholders (as of Jun. 30, 2003) Hyundai MOBIS DaimlerChrysler AG INI Steel Mong-Koo Chung and 17 persons 13.21% 4.87% 10.46% 4.08%

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Sustainability Activities by Department


Sustainability activities of Hyundai Motor are continuously improving with the help of a creative management strategy and corporate-wide efforts. At this very moment, Hyundai Motor works to ensure a more prosperous future for mankind, the environment and the company.

Hyundai Motor Company 2002/2003 Sustainability Report

R&D
R&D and Design departments are the starting point of our sustainability efforts; they have a significant influence on the sustainability of our business. We see four key areas of sustainable development: 1) next generation vehicles, 2) fuel efficiency improvement, 3) exhaust gas reduction and 4) improvement on recyclability & Design for Environment (DfE). Hyundai Motor is building strategies and plans to focus on these key areas. To develop environmentally-friendly vehicles and create other environment-related technologies, we established the Hyundai Eco-technology Research Institute (HERI) in July 2003. Also, we reinforced the role of the Environmental Product Committee to reflect the environmental issues in product development decision-making.
Policies and Strategies in R&D

combustion engine as a generator. In comparison to the serial type, the parallel type hybrid electric vehicle is characterized by superior energy efficiency and the use of a smaller battery. According to research results, the parallel type hybrid electric vehicle is believed to have high potential for replacing the conventional internal combustion engine vehicles. Getz HEV Pilot Service Program After developing its first hybrid electric vehicle, FGV-1 in 1995, Hyundai Motor developed Getz HEV in 2002. Getz HEV is a parallel type hybrid electric vehicle with an electric motor installed between the engine and the transmission. It has a 1.4-liter gasoline engine, a 12-kilowatt electric motor and Continuously Variable Transmission (CVT). Getz HEV is 54 percent more fuel efficient than its gasoline models and is designated as an Ultra Low Emission Vehicle (ULEV). From 2004, Hyundai Motor is planning its road demonstration of Getz HEV in the metropolitan area of Seoul before its commercialization. The pilot service is expected to answer the environmental impact and its optimal performance at a practical level. Hyundai Motor would like to comply with Super Ultra Low Emission Vehicle (SULEV) standards for all our fleet through continuing hybrid electric vehicle development processes. Fuel Cell Electric Vehicle (FCEV) Hyundai Motor established a fuel cell development team in the early 1990s. The team is responsible for finding the solutions to the energy and environmental issues for automobiles. In June 2000, we joined the California Fuel Cell Partnership (CaFCP) to take an initiative for developing technology to commercialize vehicles utilizing alternative energy. Santa Fe FCEV, Hyundai Motors first fuel cell vehicle, was introduced in March 2001. It was developed through a joint project with United Technologies Corp. Fuel Cells (UTCFC). In October 2001, it won two gold and two silver medals in the fuel cell electric vehicle division at the Michelin Bibendum Challenge in California. Santa Fe FCEV successfully completed the 2002 Fuel Cell Road Rally held in Sacramento, California, hosted by CaFCP. Fuel cell electric vehicles are tested for performance and endurance in a course along the Pacific coast from Monterey to Santa Barbara. Santa Fe FCEV successfully finished the 300-mile racecourse within the 3-day timeline. Santa Fe FCEV has a maximum driving distance of 160 km, fuel cell output of 75 kW, maximum speed of 124 km/h and 0-100 km/h acceleration in 18 seconds. The hydrogen fuel cell electric vehicle requires high-pressure hydrogen storage technology. In June 2001, Hyundai Motor developed a 350-bar hydrogen storage tank for the first time in the world and is now developing a 700-bar storage tank.
Getz HEV.

Type Engine Motor Battery Transmission Highest Speed Fuel Efficiency Emission

Parallel 1400cc Gasoline 12kW BLDC Ni-MH CVT 187km/h Improved by 54% ULEV

Category Next generation vehicles

Policies Development & commercialization of next generation vehicles Achievement of improved fuel efficiency target Development of lowemission vehicles

Strategies - commercialization of HEV in 2006 - commercialization of FCEV in 2010

Fuel efficiency improvement

- Corporate average fuel efficiency : 170g/km by 2004 - Average CO2 emissions 140g/km by 2009 - Responding to fuel efficiency regulations by regions - Development of low maintenance and low emissions vehicles - Early response of regulations by regions - Improvement on recycling technology development and hazardous substances management system LCA and DfE in product development

Exhaust gas reduction

Recyclability & DfE improvement

Development of DfE based on recycling and LCA

Environmentally-Friendly Vehicle Development Flow

1. Next Generation Vehicles


1. Namyang R&D Center 2. Hyundai Kia Motor Europe Engineering Center 3. Hyundai Motor Japan R&D Center 4. Hyundai America Technical Center Inc.

1. Santa Fe FCEV 2. Fuel Cell Road Rally 2002

Hybrid Electric Vehicle (HEV) The hybrid electric vehicle adopts the advantages from internal combustion engine vehicle as well as electric vehicle, satisfying the demand for low emissions and high fuel efficiency. The parallel type hybrid electric vehicle utilizes both internal combustion engine and electrical motor as the power source. The serial type hybrid electric vehicle utilizes electric motor as the power source with the internal

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The success in the 700-Bar project would extend Santa Fe FCEVs maximum driving distance up to 320 km at single charge, equivalent to that of a gasoline vehicle. Another challenge for commercializing FCEV is to make it operable at below zero degree Celsius condition. We work with UTCFC on such second-generation FCEV technologies, which are expected to be completed by 2004. Through road tests and pilot services in practical conditions, Hyundai Motor will develop technologies for the commercialization of FCEV by 2010.

Improvement of Volumetric Efficiency The air in the cylinder chamber cools rapidly as the fuel is injected and evaporates. The lower the temperature of the air in the chamber, the more volumetric efficiency and anti-knocking improves, which in turn results in a 10 percent increase in engine performance through better compression ratio and spark timing adjustment. Complete Combustion and Exhaust Gas Recirculation (EGR) Valve Conventional engine emits HC, CO and NOx. The amount of exhaust gas depends on the air-fuel ratio: as the air-fuel ratio lowers, the amount of HC and CO emission decreases while NOx increases. Gasoline Direct Injection Engine combusts fuel completely at ultra low air-fuel ratio hence emitting reduced amounts of HC and CO. The amount of NOx emission is reduced by utilizing a large capacity catalyst and EGR valve. Variable Geometry Turbocharger (VGT) VGT diesel engine enhances fuel efficiency while reducing emissions. It optimizes the driving force over wide ranges of speed by controlling the amount and flow rate of exhaust gas through a turbocharger. The 1,991 cc VGT diesel engine produces a maximum of 125 horsepower, a 13 percent improvement, in comparison to current common rail direct injection engines. It also improves the maximum torque by 29.5 kgm/rpm and fuel efficiency by 5 to 10 percent. The Trajet XG and Santa Fe utilizes this VGT diesel engine.
Reduction of Exhaust Gas by EGR Valve Improvement of Volumetric Efficiency

Vice Chairman Dong-Jin Kim at The Signing of an Agreement with UTCFC on Joint Fuel Cell Development.

H2 700-Bar Project Hyundai Motor is developing the high-pressure hydrogen storage tank for the improvement in driving distance by participating in the H2 700-Bar Project. The project is executed in a consortium with Toyota, Nissan, DaimlerChrysler, Ford and Peugeot, and is led by Powertech Lab Inc, Canada and Kokan Drum Co., Japan, with the goal of commercializing high-pressure hydrogen storage tank by 2005.

2. Improving Fuel Efficiency


Gasoline Direct Injection Engine Unlike the conventional gasoline engine that supplies air and fuel mixture, the Hyundai Motor gasoline direct injection engine supplies air and fuel separately. The direct injection engine improves fuel efficiency and engine performance and reduces emissions in comparison to conventional engines. Reduction of Pumping Loss Air flows into the vacuumed combustion cylinder by downward movement of the piston in a gasoline engine. The smaller the opening of the intake valve, the greater the airflow resistance. The greater the airflow resistance, the more power to pump the piston. The power lost in pumping the piston at high airflow resistance condition results in engine output loss. The engine output loss is also called pumping loss. The direct injection engine combusts at 40:1 air to fuel mixture ratio as opposed to the conventional engine that combusts at 14.7:1. This represents a 30 percent improvement in fuel efficiency.

Variable Geometry Turbocharger (VGT)

Vane Control Actuator

Reduction of Pumping Loss

Variable Turbine Inlet Vanes

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3. Emission Reduction
Low Emission Vehicle Governments around the world regulate emissions from both present and future vehicles through initiatives such as LEV II Program (California, USA), Euro-III and Euro-IV (Europe). Hyundai Motor plans to respond to ULEV for all of its fleets by 2005. We have commercialized Elantra complying with SULEV standard since December 2002. The SULEV is an emission standard five times stricter than ULEV; Hyundai Motor became the fourth company to commercialize a model complying with SULEV. As of 2002, all models from Hyundai Motor met Euro-III and most of our gasoline vehicles met Euro-IV. In 2003, the Korean government introduced a new emission standard based on Low Emissions Vehicle (LEV) in North America. In 2002, Hyundai Motor had already launched Elantra in compliance with LEV.
Emission Standard in North America (LEV-II) Standards ULEV SULEV NMOG 0.055 0.01 CO 2.1 1.0
(Unit : g/mile @ 120kmile)

Diesel Particulate Filter (DPF) The demand for diesel-powered vehicle is increasing because of its environmental advantage over gasoline-powered counterparts: diesel engine emits less CO2 and is more fuel-efficient. However, the diesel engine emits more NOx and particulate matter. To cope with those issues as well as to comply with Euro-IV, Hyundai Motor is researching HC, CO, NOx and particulate matter emission reduction technology for diesel engine. We improved our existing oxidation catalyst technology to reduce HC and CO emission by 90 percent. By improving the diesel engine combustion efficiency, NOx emission is reduced by 15 percent. Hyundai Motor developed DPF, which can reduce particulate matter emission from diesel engine by 90 percent.

Exhaust Gas Inspection

DPF (Diesel Particulate Filter)


Temperature Sensor Pipe for Differential Pressure Measurement Catalyst Coating

4. Recycling
End-of-Life Vehicle (ELV) Directive has been strictly mandated in Europe since July 2002 and from 2005 in Japan. Environmental restrictions are becoming more comprehensive and stringent especially in the areas of emission and recycling. We are developing recycling technologies to recycle up to 95 percent of end-of-life vehicle. As part of our recycling effort, Hyundai Motor adopted Life Cycle Assessment (LCA) to analyze environmental impact of a vehicle from its initial designing stage to dismantlement. The Recycling Subcommittee is established under the Environmental Product Committee to effectively respond to overall automobile recycling issues.

NOx 0.07 0.02

*NMOG : Non Methane Organic Compounds

Emission Catalysts Super Ultra Low Emission Catalyst Hyundai Motor developed a super ultra low emission catalyst by integrating catalytic material technology for after-treatment, catalyst technology, sensor technology and engine & fuel injection system control technology. Hyundai Motor will continue to innovate its catalyst technologies to meet SULEV for all of its fleets. Equivalent Zero Emission Vehicle (EZEV) Hyundai Motor is aiming to develop a most advanced emission control technology. With this aim, we developed new catalyst technology, absorbent for cold-start hydrocarbon, ultra-thin wall catalyst & metal catalyst technology and dual-pipe technology for fast-warm up. When these technologies combine with our air-purifying radiator technology, all fleets from Hyundai Motor can achieve 1/10th of the SULEV standard. Air-purifying Radiator Ozone is a corrosive substance generated when hydrocarbon and nitrogen oxide undergo a photochemical reaction. Ozone in the lower atmosphere is harmful to the human body, causing respiratory illnesses. The air-purifying radiator reduces ozone density in the air by converting ozone into oxygen through an ozone decomposing catalyst. Hyundai Motor completed the development of an air-purifying radiator and began installing it on selected models in 2003.

Recyclability Assessment Information System in design process

Recycling Regulations Description EU ELV Directive (2000/53/EC) Subject : M1, N1 2002 2003 2004 2005 2006 2007 2015

4Free Take Back of ELV (Vehicles sold after Jul. 1, 2002)

4Free Take Back of ELV (All Vehicles) 4Recyclability 4Recyclability 85% 95% 4Restriction of Hazardous Substances Use + (Hg, Cd, Pb, Cr6 ) 4Mandatory Treatment of and ASR 4Recyclability 95%

Japan Recycle Act

4Implementation of Refrigerant Recovery and Destruction 4Recyclability 85%

Korea Resource Conservation and Recycling Act

4Revision of Preliminary Assessment Clause

4Recyclability 85%

4Recyclability 95%

* Recycling means parts reuse, material recycling and energy recovery.

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Design for Recycling (DfR) Recyclability Assessment Information System in design process (RAIS) RAIS is an intranet based recyclability evaluation program, started in October 2002. The system provides designers with a platform to evaluate material recyclability, parts recyclability and ease of dismantling. The program also provides information on recyclability, which will soon be adopted by EU for vehicle type approval. Design for Disassembly (DfD) As part of our DfE effort, Hyundai Motor has been pursuing DfD since 1998. In 2002, we started to develop DfD in a joint research with Pusan National University. The DfD evaluation tools and design guideline will be integrated into the RAIS. Material Marking for Recycling Since July 1992, Hyundai Motor has been labeling material marking on all plastic parts over 100 grams in passenger vehicles and light trucks. It is to ease the segregation of parts by material nature when the parts are dismantled. In addition, Hyundai Motor plans to mark all rubber parts over 200 grams to respond to EU ELV Directive from 2003. Hyundai Motor plans to strengthen the internal material marking standard: all parts over 50 grams will be required for material marking. Reduction of Hazardous Materials Hyundai Motor is developing environmentally-friendly vehicles to preserve the environment and to respond to environmental restrictions. In July 2003, we set up a hazardous material management protocol to comply with EU Directive on Hazardous Substance. Furthermore, Hyundai Motor is developing an internal hazardous substance management system to manage hazardous substance uses in our own facilities as well as our 450 parts and material suppliers. We are currently preparing to register ourselves, and all of our suppliers, to International Material Data System (IMDS). Our design specification criteria include restriction on the use of hazardous substances listed in EU ELV Directive. Moreover, all materials and parts are laboratory tested for hazardous substance analysis. Hyundai Motor is developing alternative material and technology for materials and parts found nonconforming to the expectation specified by EU ELV Directive. For instance, Hyundai Motor has developed and commercialized lead free fuel tanks, lead-free PVC cable coatings, lead-free electro-deposition paints as well as aluminum bearings and bushing. In the meantime, we are developing a response plan on grace period for meeting the EU ELV Directive. Dismantling Information Hyundai Motor has been providing dismantling information through International Dismantling Information System (IDIS) in EU. The dismantling manuals for all new models, including Getz, were uploaded into IDIS in 2002. As a voluntary effort, we are distributing the dismantling manuals for Elantra and Getz to all domestic dismantling sites.

Waste Parts Recycling Technology Hyundai Motor has been working to improve the environmentally-friendliness of our products such as developing waste parts recycling technologies. The research on waste rubber and plastic part recycling technology is at the stage of practical application. In addition, Hyundai Motor has successfully developed waste bumper paint coating removal technology: the paint coating on waste bumper has been the most significant challenge in bumper recycling. The new technology will enable us to recycle previously non-recyclable waste bumpers. Furthermore, Hyundai Motor has developed recycling technology for floor mat and seat foam, which were made of mixed materials and components presenting difficulty in recycling. The recycled floor mats and seat foams are recycled to make trunk trims and noise absorption material. This technology is currently applied to Sonata and XG models. For large plastic parts assembled with multi-components, such as dashboards, Hyundai Motor is developing disassembling technology for part and component segregation. Rubber Recycling The thermosetting rubber is difficult and uneconomical to recycle. Hence, research on thermosetting rubber recycling has not been pursued. On the contrary, Hyundai Motor has developed thermosetting rubber recycling technology in which waste weather strips are pulverized to be recycled as noise absorbing and/or weather strip raw material. Waste Bumper Recycling System For the first time in Korea, Hyundai Motor is establishing a waste bumper recycling system to recycle waste bumper collected from dismantling sites and after service centers. The collected waste bumpers will be recycled to bumper cover and/or engine under-cover by utilizing bumper paints coating removal technology and compounding technology. Hyundai Motor plans to implement this system by November 2003.
Waste Bumper Recycling System

1. Dismantling Manual for Elantra and Getz 2. Material Marking (Plastic Container) 3. Material Marking (Plastic Injection Mold Parts)

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End-of-Life Vehicle (ELV) Recycling ELV Disassembly Plant Hyundai Motor is building the nations first pilot ELV disassembly plant to assess the operability of the equipment and to optimize the operation process. The construction of the plant will be completed in October 2005 and will employ 2 persons, disassembling 2,300 vehicles per year.
ELV Disassembly Plant Location Area Capacity Budget Expected Date of completion

5. Joint Research Activities


Hyundai Motor, with leading academic institutes and scholars, is engaged in a number of joint research activities. In 2002, Hyundai Motor had adopted Feasibility Study System, which invites scholars for research proposal submittal, seed money (initial allowance) funding and initial result evaluation. Research proposals with high evaluation scores will develop into research projects.
Joint Research Activities

Birds-eye View Map of ELV Disassembly Plant

Hwaseong City, Gyeonggi Province, Korea 10,900m2 20 cars per day (12 persons required) 2.47 billion Korean Won Oct. 2005

Number of Joint Research Total (billion Korean won)

2000 52 2.3

2001 72 4.1

2002 65 5.2

Air Conditioner Refrigerant Freon and R134a are known as an ozone depleting substance and a greenhouse gas respectively. Hyundai Motor is developing refrigerant collection equipment as well as refrigerant destruction technology. In case of the destruction technology, Hyundai Motor and the refrigerant suppliers are researching jointly. In addition, we are developing CO2 refrigerant for automobiles. Automotive Shredder Residue (ASR) Since 2000, Hyundai Motor and Yonsei University have been jointly developing recycling technology for ASR. This project is expected to develop material sorting and heat recovery technology. We are planning to establish and operate ASR treatment facilities with corresponding affiliates. It would enable us to reduce the total amount of ASR land-filled. Life Cycle Assessment (LCA) Since 1998, Hyundai Motor has been performing LCA for parts. The assessment results are considered in the product development process. Hyundai Motor will extend LCA to total car in the future. The LCA will be a crucial element in our DfE effort: the results will be considered in product development process.
ELV Disassembly Plant Process Flow

Also, Hyundai Motor works with talented students and aspiring engineers. Since 1995, the annual vehicle design contest hosted by Hyundai Motor has been an opportunity to engage young minds in the field of automobile design. The R&D scholarship fund invites a select group of outstanding students to join the Hyundai Motor research team as an intern while continuing their studies. This gives the students an opportunity to gain valuable on-site experience and apply their theoretical and creative skills in a real-world setting. Hyundai Motor supports the continuing education of promising employees by subsidizing their tuition. They go back to school to learn new trends and gain strong theoretical understanding of their fields. We value an educated workforce and the mid- to long-term benefits, while individuals enhance their professional and personal skills.

1.

1. Annual Vehicle Design Contest 2. Joint Research Agreement Ceremony with Shinsung College

2.

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INTERVIEW >>>
Purchasing
We consider the development of environmental technology itself to be core contribution to society. We want to contribute to society by increasing the production of environmentallyfriendly vehicles.
Joon-Chul Park, Ph.D Senior Vice President Hyundai Eco-technology Research Institute

One passenger vehicle consists of over 20,000 components. Consequently, the environmental and social performance of suppliers directly influences Hyundai Motors environmental and social performance. We are willing to engage suppliers in dialogues on sustainability. Educating our suppliers and helping them stay on track are a vital part of our sustainable business.

1. Green Purchasing System


In accordance to environmental management strategy, Hyundai Motor has been encouraging its domestic suppliers to establish environmental management system. As part of Hyundai Motors green purchasing system, we have provided training on environmental management system for over 450 domestic suppliers. Hyundai Motor is planning to improve the Five Star system (a supplier quality evaluation system) to include elements on environmental performance from 2004.
Hyundai Motor Company Green Purchase Strategy
Supplier Environmental Management Training (352 Suppliers).

Q: What is the role and vision of the Hyundai Ecotechnology Research Institute? The Institute will play a key role in achieving environmental target for ECO GT5 2010 as announced in Hyundai-Kia environment management declaration by Chairman Chung Mong-Koo. We will establish core competence and system to develop environmentally-friendly products which will enable us to respond to various environmental regulations, which are another trade barriers. We are developing product oriented environment technologies such as environmentally-friendly design, recycling, next generation vehicle, emission reduction, fuel efficiency improvement as well as production oriented environmental technologies, air and water treatment and reduction of energy consumption and waste generation. Some internal organization and systems will be reorganized for all the technologies developed by the institute to be fully applied to new car development in Namyang R&D center. And we are planning to apply Life Cycle Assessment (LCA) at the beginning stage of development to assess and improve environmental impact, and finally establish total LCA system ranging from design to disposal. Q: What do you see for the future, especially regarding environmentally-friendly vehicle and next generation vehicle? Environmental damage done and the growing scarcity of nonrenewable resources are creating a demand for environmentally friendly next generation vehicles like fuel cell electric vehicles, hybrid electric vehicles, electric vehicles and so on. And automakers are accelerating their development of these vehicles to position themselves ahead in the market with extraordinary potential within 5 ~ 10 years. Both hybrid vehicle and fuel cell vehicle will be in strong demand by 2030, coexisting rather than competing on the environmentally friendly vehicle market. Further into the future, fuel cell vehicle will eventually take

over the major market share, as fossil fuel resources deplete and costlier to maintain. Almost all vehicles manufactured after 2050 will be powered by fuel cells. Q: What is the direction of the institute for social responsibility? We consider the development of environmental technology itself to be core contribution to society. We want to contribute to society by increasing the production of environmentally-friendly vehicles. Hyundai hybrid vehicle will be showcased at the 2004 Olympics in Athens, highlighting the theme of environmental protection. On April 2003, we sponsored vehicles to support the torch carriage, marathon and environment related events. Five Hyundai Santa Fe electric vehicles are on the road in Jeju Island for pilot service from November 2003 to October 2005. Q: Efficient and clear internal/external communication is very important for a successful response to environmental and social problems. How does the institutes message get across? It is improper to apply past procedure and internal standard to newly arising issues regarding the environment. So we are having explanation meetings focusing on working level for each department to understand the issues quickly. Also we set up environmental product committee and some sub committees for inter-departmental communication and coordination. For external communication, we are joining the International Material Data System (IMDS) to share information with our partners on component recycling, material weight and hazardous material contents. We also invite academics to join industry in regular forums resulting in technological performances. Were planning to engage environmental organizations in the future and listen to their views on the development of environmentally friendly vehicles.

2. Supplier Environmental Management Training


In accordance to ECO GT5 2010, the purchasing department trained managers from major suppliers in June 2003. The training session focused on Hyundai Motors environmental management strategy and green purchasing systems. By keeping the suppliers informed of our environmental management strategy and policy, Hyundai Motor expects the suppliers to improve their environmental management initiatives to emulate ours.

3. Support Center for Supplier Employees


Improving human rights and workplace environment is an important part of our sustainability initiatives. Since April 2003, the purchasing department operates a Supplier Employee Support Center to offer assistance in legal affairs, wage, welfare and unfair treatment.

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Supply Chain Environmental Management (SCEM) Project Since 2003, Hyundai Motor is participating in the SCEM project sponsored by Korean National Cleaner Production Center (KNCPC), an affiliate of the Ministry of Commerce, Industry and Energy (MOICE). The SCEM projects goal is to establish environmentally-friendly supply chain management system by supporting suppliers in establishing their environmental management strategy encompassing the entire value chain of their business. As part of the project, Hyundai Motor is supporting the suppliers to adopt environmentally-friendly production technology and develop their own DfE. We also plan to build a web-based network for sharing environmental information among suppliers. The 1st year phase of SCEM project is currently ongoing (July 2003 ~ June 2004), with the involvement of 10 selected suppliers, before it is implemented to other suppliers around the country.
SCEM Organization

VAATZ System

4. Purchasing Department Ethics Charter


The purchasing department has established a purchasing department ethics charter to ensure a transparent purchasing system. Purchasing Department Ethics Charter 1. Our goal is to realize a more prosperous life and to improve the quality of life by developing and supporting safe and environmentally-friendly products. 2. Our duty is to pursue mutual development with domestic and foreign suppliers by creating the highest value through fair and transparent purchasing. 3. Our target is to be ethical purchaser through proper and responsible conduct to attain transparent management. 4. We endeavor to earn respect by creating a transparent and fair purchasing culture, respecting ourselves and maintaining our dignity.

5. VAATZ Purchasing System


The Value Advanced Automotive Trade Zone (VAATZ) is Hyundai Motors proprietary system for procuring goods and services, directly linking suppliers with Hyundai Motor. The purchasing and payment for parts is conducted entirely online through the VAATZ system.
Satellite Photo : Ulsan Plant
Total site area-4,958,700m2 Total built area-2,314,060m2 Plant # 1 : Accent, Getz Plant #2 : Centennial, Dynasty, Santa Fe, Atos prime Plant #3 : Elantra, Coupe, Matrix Plant #4 : XG, H-1, H-1 Truck, H-100 Truck Plant #5 : Terracan, Matrx, Sonata Taxi

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Production
To use energy and natural resources efficiently and minimize the impact on the environment is a part of sustainability that has to be considered important to all manufacturing industries, including automakers. To fulfill our social responsibility as a corporate citizen, we have been working to increase the efficiency of energy and natural resources uses, and develop technologies to reduce waste and recycle. In addition, we have been trying to reduce our impact on environment by developing clean production and using environmentally-friendly materials. In 2002, we established a sustainable clean production system by consolidating corporate environmental management system.

Energy Conservation (Electricity and Gas) In 2002, we reduced the use of electricity by 40.89 GWh through lighting improvements, equipment realignment, operation rationalization, waste heat recovery and energy-efficient equipment purchasing at our three domestic production facilities. We also reduced the use of natural gas by 2.7x106 Nm3. It totals 2.5 percent reduction in electricity and 1.5 percent reduction in natural gas consumption of that year. Advanced Air Refreshment Plant (ARP) Wash Zone Type In 2002, we replaced the ARP wash zone type from media type to nozzle type at Ulsan plant. With the nozzle type, the water pump operation period has significantly reduced, resulting in energy and water consumption reduction. Through the improvement in efficiency of humidification, we can save a total of 3,178,000 Nm3 of natural gas use each year with the new system. Microwave dry oven The foundry process in Jeonju plant reduced the use of natural gas by 308,000 Nm3 per year by replacing its coated mold core dry oven from gas burning to microwave type. The gas dry oven is known to consume a large quantity of natural gas and is prone to quality problems. Recovering Boiler Waste Heat In July 2002, the Jeonju plant installed the boiler automatic drain system to recover the waste heat. The new system is installed with plate type heat exchanger to recover the heat from the drains and transfer it to the incoming water at room temperature. It allowed approximately 176,000 Nm3 of natural gas use reduction per year.
Energy Conservation (Electricity)

1. Resources and Energy


Use of Resources and Energy A wide spectrum of materials is used in the making of an automobile: metal plate, paint, aluminum, organic solvents and toxic substances such as NaOH and HCI and so forth. The energy uses include electricity, petroleum, coke and natural gas. The improvement on energy and natural resource consumption is the key element of clean production and protection of the natural environment. Hyundai Motor is monitoring on its manufacturing process to improve the use of energy and natural resources. Please refer to the appendix for the basic environmental data of our facilities in 2002. Resources and Energy Conservation Waste Reduction and Recycling Hyundai Motor is engaged in resource and energy conservation. Our conservation effort concentrates in two areas: source control and recycling. We suppress the generation of waste at the source, such as the improvement on inner panel surface coating. We recycle door hole scraps, sludge from wastewater treatment facilities and package wastes in which we also recover costs. We maintain waste inventory to monitor the progress on reduction of waste. Ultimately, Hyundai Motor targets to reduce the amount of waste generation to 0.38 kg per vehicle per annul.
Energy, Material and Water Use (2002)

1. 2.

Media Type ARP (Before) Nozzle Type ARP (After)

1. Ulsan Plant 2. Asan Plant 3. Jeonju Plant

Energy Conservation (Gas) Recovery of Boiler Waste Heat

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Chemical Management Service Hyundai Motor sponsors and participates in the Chemical Management Service (CMS) project, co-sponsored by the Ministry of Industry, Commerce and Energy (MOICE). Its purpose is to establish corporate-wide chemical management system (from purchasing to disposal) including environment, health and safety issues. Currently, Chemical Strategy Partnership (CSP), a US-based non-profit organization, and scholars from Keimyung University are participating in this project. With Ulsan plant as the subject facility, this project is to identify all chemical uses and optimize chemical handling practices. It is intended to reduce potential environmental impact and save the cost for material purchasing in turn. Hyundai Motor is planning to extend CMS to all our plants in the future.
Chemicals Management Service

Wet Scrubber with Electro-static Precipitator Hyundai Motor added electro-static precipitator (ESP) to existing wet scrubber stacks to eliminate both ceruse mist and discernable odor from dry oven facilities. It improved the efficiency of the emission control and saved cost for replacing the control facility entirely. Refrigerant Feeder Although it is not an ozone-depleting chemical (ODC), the hydro fluorocarbon (HFC) refrigerant is known as one of the greenhouse gases. Hyundai Motors commercial buses use HFC as air conditioner refrigerant. The buses at the end of the assembly line are double inspected for any leakage of HFC. The line is also equipped with a refrigerant feeder that is capable for both injecting and extracting HFC. It can remove HFC that are overfed, eliminating leakage from over-pressured refrigerant tanks.
Refrigerant Feeder

1.

1. 2.

Wet Scrubber without ESP (Before) Wet Scrubber with ESP (After)

2.

Environmentally-Friendly Packaging Automobile manufacturing can be characterized by large numbers of parts delivered in from suppliers. Correspondingly, a large quantity of packing is used to protect the parts: sometimes over packaged or packaged with non-recyclable materials resulting in package waste. To reduce packaging waste, Hyundai Motor engaged in parts packaging improvement initiatives since 1998. During the 1998 to 2001 period, Asan plant had selected 112 different parts assigned for packaging reuse/recycling and optimization. Ulsan plant designated 7 parts packaging from disposable to reusable, achieving a significant reduction of package waste and cost saving.
Environmentally-friendly Packaging

2. Reduction of Pollutant and Waste


Pollutant and Waste Hyundai Motor is pursuing cleaner production by improving discharge control measures at each source and setting internal discharge standards exceeding regulatory requirements. Reduction of Pollutant and Waste Discharge Hydraulic Oil Filters Hydraulic oil in press machines requires periodic replacement, approximately once in 2~3 years. It generates a large quantity of oil waste in each replacement. By installing oil filters in press machines, Hyundai Motor extended the life span of hydraulic oil, reducing 1,620 kg oil waste per year and the overall defect rate of the press machines.

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Electro-deposition De-ionized Wash Water Recycling

Electro-deposition De-ionized Wash Water Recycling Through the use of a De-ionized (DI) recycling system, Hyundai Motor recycles waste DI wash water used during electro-deposition process. It was once considered non-recyclable due to the presence of fine colloids. We reduced the quantity of DI wastewater by as much as 70 percent and improved over 50 percent in the BOD level of the waste DI wastewater. Water-soluble Paint Hyundai Motor has a corporate-wide plan to reduce the VOCs emission from the use of thinners for oil base paints while increasing the use of water-soluble paints. This plan is expected to reduce VOC emissions from the present 67 g/m2 to 35 g/m2. Asan plant, as the pioneer plant, will install the water-soluble paint facility by 2003. Lead-Free Electro-Deposition Painting System

4. Environmental Management in Production


Environmental Training Our goal to conserve natural resources and minimize our environmental footprint requires high environmental awareness and active participation from our employees. Hence, Hyundai Motor has continuously been providing environmental training to its employees on how to create a safer, more environmentally-friendly workplace. The training participants bring their ground-zero experience in developing practical and innovative solutions to environmental challenges. In 2002, we implemented two new employee-training programs: environmental management and environmental safety training. We also hosted an environmental forum that year to put the spotlight on environmental trends and new technologies.
Environmental Training at Domestic Plant (2002)

Lead Content in ED Paint (Line average in Ulsan plant)

Currently, Hyundai Motor uses lead containing electro-deposition paints. We are planning to develop lead-free electro-deposition paints that meet the same quality standards, but are less harmful to the environment. Non-Face Welding Hemming Sealer Conventionally, the inner and the outer plates are welded together followed by sand grinding, which generates metal dust. Hyundai Motor developed non-face welding process using ceramic ball and sealer. It eliminates the sanding process, solving the problem of metal dust. It also improves the quality of body plate painting and reduces environmental impact.

Participants All Employees Environment and Safety Team Environment Managers Chemical Managers Nominee for Promotion in Environment and Safety Department Internal Environmental Auditors Environmental Coordinators Environment Manager in Each Plant

Head Count All Employees 19 3 152 12

Contents Environment Awareness Hazardous Substances Management Environment Management Toxic Material, Treatment Method, Response in Emergency Environment Management, Fire Emergency ISO 14001 Requirement, Regulation, Auditing ISO 14001 Requirement, Regulation, Environment Management Trends and New Technology, Best Practice on Environment

Time 2002 May 2002 Apr. ~ May 2002 Biennial Routine Training

3 83 2

Jul. ~ Aug. 2002 Nov. 2002 Nov. 2002

Non Face Welding Hemming Sealer

3. Logistics Optimization
Logistics system optimization has both economic and environmental benefits. The benefits can include cost saving on the economic aspect and natural resource conservation on the environmental aspect. The environmental benefits allow companies to fulfill its social responsibilities as an accountable corporate citizen. Hyundai Motor developed Pyongtaek and Kunsan harbor as part of its logistics optimization effort. We have established a collective logistics system, which utilizes selected common delivery vehicles as opposed to each supplier operating delivery vehicles independently. In 1997, we have adopted the collective logistics system for 32 suppliers in the Daegu area. Asan plant and Jeonju plant have adopted this system since 1998 and 1999 respectively.
Logistics Optimization

Internal Environmental Audit In 2002, Hyundai Motor performed environmental management systems audits at our assembly plants over a period of 5 months, auditing a total of 49 departments. The internal audit revealed 159 nonconforming issues of which 157 items were corrected. Also, there were 58 recommendations, which include improvements on environmental awareness and employee roles and responsibilities. We plan to focus the 2003 internal environmental audit on regulatory compliance, performance against last years objective & targets, corrective action and overall conformity of actual practices against their Environmental Management System (EMS).
Internal EMS Auditing (2002)

Face Welding

Non Face Welding

Independent Logistic System

Collective Logistic System

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Certificates Jeonju plant is both OHSAS 18001 and KOSHA 2000 certified. However, we endeavor to go beyond the minimum requirements laid out by these standards. Complying with Environmental Regulations Hyundai Motors self-imposed emission standards are 30 percent lower than the legally mandated standard in Korea.
Regulatory Standard VS Internal Standard (Emission)
<For Ulsan Plant (Special Countermeasure Area Under Korea Law)>

6. Contribution to Local Community


Roadwork for Donation Hyundai Motor invested a total of 34.1 billion Korean won to construct a public road near Ulsan plant, which we donated to the city. The construction began in October 1994 and was completed in a 28 month construction period. It extends for 4.92 km at the width of 30 m solving the chronic traffic problem in and out of Ulsan plant. In June 2001, the city government officially re-named it Asan Road in commemoration of Hyundai Group founder Ju-Young Chung. Hyundai Motors International Manufacturing Plant: Alabama Hyundai Motor is investing one billion US dollars to build our third international manufacturing plant, in Montgomery Alabama, US. The facility will roll out the first American-made Hyundai car in 2005 and will create new employment for over 2,000 local residents. Also, a total of 11 partners, including Hyundai MOBIS and HYSCO, will invest an additional 430 million US dollars in the project and will employ another 5,000 people at separate facilities. The Alabama plant will not only boost local businesses, but also have a profound impact on the community through the creation of jobs and opportunities.

Substances PM (mg/Sm3) NOx (ppm) SOx (ppm) CO (ppm) HCI (ppm)


Regulatory Standard VS Internal Standard (Discharge)

Regulation 120 350 (Cupola) 500 (Core Manufacturing) 600 (Incinerator) 6.0 (Melting Furnace)

Internal Standard 24 70 20 120 1.2


<For Ulsan Plant>

1. KOSHA 2000 and OHSAS18001 2. Employees Gymnasium

Substances COD (mg/l) BOD (mg/l) SS (mg/l) n-H (mg/l)

Regulation 90 80 80 5

Internal Standard 40 20 20 2

1. Asan Road 2. Birds-eye View Map of Hyundai Motor Plant Alabama, US.

5. Other Activities
Fire Drills We conduct annual fire drills at all domestic assembly plants to better prepare our employees and facilities in the event of an emergency. We worked together with local fire departments to improve the fire safety of the Ulsan plant in October 2002 and Asan plant in April of the same year. Health and Safety Hyundai Motor provides industrial accident prevention sessions mandatory for our employees and on-site subcontractors. Also, we offer new training sessions on ergonomics and operate a gymnasium for the improvement of employee health.

INTERVIEW >>>
Employees must be aware of the consequence of his/her own actions with regard to environment and safety.
Kyu-Bo Lim general manager Environment and Safety Team, Ulsan plant

Q: What do you think about environmental problems, workplace environment and occupational safety at your plant? Company is obligated to ensure the well being of its employees by providing a healthy workplace environment. At the same time, the employees must be aware of the consequence of his/her own action with regard to environment and safety. They acknowledge that they have to comply with our environment, health and safety guidelines for their own benefit. Q: Please provide examples of the best practices in your plant with regard to environmental management. We use the waste molding sand from foundry as the

additive material in copper refinery eliminating the use of silica. It reduced a total of 100,000 tons of industrial waste every year. Q: What can you do to improve the environmental management at your plant? One person cannot change the world. However, it is important to believe that collective efforts from individuals, such as myself, can bring about change. We need to remind ourselves that it is I who will protect the environment and rejuvenate the polluted ecosystem. As the Environmental and Safety officer, I intend to reduce the generation of pollutants at sources and contribute to the establishment of a more environmentally-friendly production system.

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Marketing and Sales


1. Customer Satisfaction Survey
Hyundai Motor has been conducting a customer satisfaction survey using Hyundai Customer Satisfaction Index (HCSI). Since 2000, we have included a questionnaire about environmentally-friendly diesel passenger vehicle, Hyundai Motors corporate image and its social contribution. The results are reported to top management to formulate corporate strategies. Hyundai Motor also conducts random surveys with questions concerning issues on diesel passenger vehicle. It is to understand customer preference and identify their needs with regard to diesel passenger vehicle.

Low Emission Vehicle at Motor Shows Hyundai Motor has continued to exhibit environmentally-friendly engines in a number of international motor shows. At Frankfurt Motor Show in 2003, we exhibited the model Getz, a high fuel-efficient and low emissions vehicle. Getz was well received among the European auto market. Customer Relations Management (CRM) System Hyundai Motor has implemented a CRM system to systematically improve communication with customers. The CRM system allows an interactive communication throughout a vehicles entire life cycle. The CRM is carried out in 4 steps, which is subcategorized into more detailed programs such as the welcome-pack, the tailormade magazine, the e-letter, the e-magazine, the supporting pack for re-purchasing and Short Message Service (SMS) In 2003, this program allowed Hyundai Motor to get in touch with over 3 million customers (54 percent of all Hyundai Motors domestic customers pool) and answered 14,548 complaints. First Place in National Customer Satisfaction Index (NCSI) In 2003, Hyundai Motor placed first in the NCSI in the automotive category for three consecutive years. The NCSI is developed by Korea Productivity Center (KPC) and Michigan University who developed US customer satisfaction index. It measures key areas of customer satisfaction: quality, service, customer expectation, value and more.

2. Communication with Consumers on Sustainability


Public Events In 2002, Hyundai Motor hosted a number of public events to communicate with consumers on the environment, society and sustainable future. It includes flower festivals, Boong Boong Yi painting contests and seed sharing events. Communicating through Hyundai Motor World Hyundai Motor announced its environmental activities and accomplishments through Hyundai Motor World, a quarterly magazine published by Hyundai Motor. In the 2003 spring issue, we announced our medium-to long-term environment management strategy and the development in hydrogen fuel cell electric vehicles. In 2003 summer issue, we presented articles on our declaration of ECO GT5 2010 and official sponsorship to the 2004 Athens Olympics. We have been publishing this magazine in English only, however, we are planning to add Spanish and Arabic editions to communicate with a wider range of interested parties.
1. Boong-Boong-Yi Painting Contest on Environmental Themes.

3. Requirements for Dealers on Sustainability


Environmental Management Contract with Dealers In April 2003, Hyundai Motor drafted a new version of its dealer contract including environmental clauses. All domestic Hyundai Motor dealers are required to resign with the revised version and it will also be applicable to European dealerships in coming year. Training for Hyundai Motor Dealers and Dealer Agencies We conduct 13 training courses on environmental management for Hyundai Motor dealers and 5 dealer agencies. To maximize the efficiency of the training, courses are offered in different levels based on the number of training programs previously attended and years of employment. The agendas of the training include social responsibility, Hyundai Motor Environment Management Policy and details of our environmental management strategy. In 2002, a total of 118,724 dealers completed one or more training courses, with the average per dealer training hours of 100.1 hour per year. Hyundai Motor intends to further improve the training system and continue our effort on environmental and ethics management as a responsible corporate citizen.
1. Chicago Motor Show 2003. 2. Geneva Motor Show 2003. 3. Busan Motor Show 2003.

Catalogs Product catalogs include information on Hyundai Motors environmental initiatives and activities. In addition, we restrict the uses of cellophane coated paper on our catalogs to protect the environment as well as save cost in recycling. Reusable Common Booths at Motor Shows Since 1995, Hyundai Motor has used reusable common exhibition booth at conventions in Europe and North America and adopted this system in the Asia Pacific region from 2003. The reusable booth can be used for many years, saving resources and reducing waste.

2. First Prize Winner at Boong-Boong-Yi Painting Contest 2003. 3. Ulsan Plant Flower Festival.

Hyundai Customer Satisfaction Index (Environment)

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4. Supporting Sports Events


We provide support to many sporting events. We believe that sports events are the most effective tool to bring people together regardless of nationalities, race and/or ideologies. Hyundai Motor, as an official partner of FIFA, sponsored 1999 FIFA Womens World Cup (US), EURO 2000 and 2002 FIFA World CupTM Korea Japan. Moreover, we will sponsor EURO 2004, FIFA 2006 World Cup and FIFA Womens World Cup 2003 (US) in upcoming years. Hyundai Motor, as a Grand National Sponsor, bestowed Santa Fe Electric Vehicle (EV) and all-aluminum body Getz to the representatives of the Athens 2004 Organizing Committee for the Olympic Games (ATHOC) in June 2003. Santa Fe EV will be the torchbearer and lead car at the marathon race in the 2004 Athens Olympic Games. Hyundai Motor believes this opportunity can showcase our determination for environmental protection and sustainable development.

After service market


The aftermarket division at Hyundai Motor supports its environmental management systems through environmentally-friendly service and efficient environmental information management.
Environmental Management for the Aftermarket

Free Vehicle Inspection Service in Celebration of ECO GT5 2010 Declaration

1. Donation of Santa Fe EV to ATHOC 2. Santa Fe EV in Athens

Hyundai Motor as Sponsor to Major Sporting Events

1. Environmental Management
Free Emission Inspection To celebrate the declaration of our ECO GT5 2010 and to raise environmental awareness among our customers, some 2,000 employees at 23 Hyundai Motor service centers performed a free emission inspection for 47,000 vehicles. ISO 14001 All 23 domestic Hyundai Motor service centers were ISO 14001 certified in March 1998. Hyundai Motor introduced the standardized environmental management manual to 1,200 subcontracted service centers to operate with the same environmental management system as that of Hyundai Motor service centers. Hyundai Motor is planning to implement environmental validation system and eventually recommend ISO 14001 certification for all subcontracted service centers from 2004.
Waste Management Procedure

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Water-soluble Paints Since 2003, Hyundai Motor has implemented the use of water-soluble paints for selected models to reduce the volatile organic compounds (VOC) emission. We are planning to extend the use of water-soluble paints to all models by 2005. Beautiful, Attractive and Safe service shops with opportunities to Innovate within necessary Controls (BASIC) Movement Hyundai Motor Service Centers The BASIC movement, started in September 2001, is meant to transform service centers into environmentally-friendly and comfortable spaces for customers to achieve higher levels of customer satisfaction and employee confidence. Subcontracted Service Centers In order to extend the BASIC movement to subcontracted service centers, we developed and distributed BASIC standard manuals in April 2003. Hyundai Motor is empowering the steering committee to train and monitor the subcontracted service centers and evaluate their performance.

3. Social Activities
Free Vehicle Inspection for the Physically Challenged Hyundai Motor provides a free vehicle inspection for the physically challenged and handicap taxi on April 20th every year. This program is part of Hyundai Motors corporate social responsibility initiative. We plan to expand this service in the near future. Clean-Up Campaign All Hyundai Motor regional service centers participated in an environmental clean-up campaign in May 2002. A total of 50 regional clean-up projects were conducted with 794 participants from Hyundai Motor and local communities. Customer Safety Hyundai Motor is sponsoring Weekend Vehicle Maintenance Course and Owner Maintenance Course (basic engine tune-up and on-the-road inspection) to improve customer safety.
1. Clean-up Campaign

2. Communicating with Employees


Proactive and voluntary participation is a collective result of mutual trust between management & employees and employees & employees. It plays a key role in achieving customer satisfaction and effective environmental management. Hence, the after service division at Hyundai Motor hosted a series of recreational activities such as One Mind sport event and Beach Camps to promote employee esteem and encouragement.
1. One Mind Cultural Event 2. Beach Camp 2003 3. Free Vehicle Inspection for The Physically Challenged

First Prize in Korean Standard Service Quality Index (KS-SQI) KS-SQI is a composite index that tracks customer satisfaction rates on the overall quality of the Korean service industry. The survey has been conducted every year by Korea Standards Association and Dong-A Daily since 2000. Hyundai Motor after service division took the first prize in the passenger car service category.

2. Korea Standard Service Quality Index : First Prize

One Mind Cultural Event In November 2002, 2,500 employees from after service division participated in this sporting event for friendly competition and friendship building. Beach Camp Employees and their families from after service division were invited to join the Beach Camp in July 2003.

Online Vehicle Inspection Data Network For efficient management of after service records, Hyundai Motor is developing Electronic Document Management System (EDMS). This online system will improve the overall quality of after sales activities by enabling mechanics to access vehicles inspection and maintenance history at any location connected to the network. The system can also be used as a training tool by service mechanics exchanging useful hints & tips. Furthermore, the communication and data exchange will occur simultaneously: it is now possible to provide quality services at a shorter period of time.

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Appendix/Environmental Data
Following graphs represent the energy use and pollutants discharge status from the domestic manufacturing plants (Ulsan, Asan, Jeonju), Namyang R&D Center and all Hyundai Motor After Server centers for the last three years.

Appendix (Continued)

*Data from A/S is Included from 2002.

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Appendix (Continued)

Appendix (Continued)

*Data from R&D is Included from 2001.

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Contacts KPMG Global Sustainability ServicesTM


Address: Environmental Management Strategy Planning Team, Hyundai Motor Company, 231, Yangjae-Dong, Seocho-Gu, Seoul, 137-938, Korea Homepage: www.hyundai-motor.com E-mail: environ@hyundai-motor.com Tel: +82-2-3464-2025 Fax: +82-2-3464-3451

The publication of this rst sustainability report, represents a signicant step for HMC in realising its ambition of becoming a top ve global player
Arjan de Draaijer works as a verier with KPMG Sustainability in the Netherlands. He specialises in using assurance techniques to improve the quality of a companys sustainability report and the associated reporting organization. He has worked for several multinational companies.

As transparency is one of the important features for a recognized player in the international business arena, the publication of this rst sustainability report represents a signicant step for HMC in realising its ambition of becoming a top ve global player. Through our experience of working with HMC, in a partnership to develop its sustainability strategy, we feel that HMC still has some signicant challenges with respect to sustainability management and reporting ahead: Based on our visits to two plants and headquarters in Korea we have recommended HMC to increase the reliability of the reported information by improving the internal control procedures at all stages of the reporting process and developing a company wide reporting manual to align the denitions and scope of the key sustainability performance indicators globally. This will positively contribute to the effective management of sustainability throughout HMCs operations. The main focus of this rst sustainability report is on HMCs domestic operations. We have recommended HMC to widen the scope of the next sustainability report, in particular the performance information, to its global operations. This can be accomplished if HMC extends its good practice of registering environmental data at the Korean sites to the other countries where it operates and expands the scope of its reporting systems beyond environmental information. We regard HMCs intention to obtain external assurance on its next global sustainability report as a signicant step in HMCs journey on the road to sustainability.
Arjan de Draaijer

KPMG provides sustainability services to businesses and organizations wishing to gain greater understanding and improved management and reporting of environmental, social and ethical performance. KPMGs Global Sustainability ServicesTM has over 350 professional staff working in 30 countries worldwide. We employ professionals with extensive experience in the services we deliver, experience that is maintained through participation in international initiatives in sustainability and through developing strategies with clients. We work within KPMG multi-disciplinary teams with backgrounds in business risk, compliance, nance, tax, audit and certication. We develop working relationships on a client needs basis with NGOs, industry groups and technical service providers.

As part of our commitment to sustainable practices, KPMG Sustainability has worked with UK-based company Future Forests to balance (offset) all CO2 emissions relating to our travel on this HMC project making it CarbonNeutral. A total of 20.9 tonnes of CO2 (emitted through ights and car travel), have been offset through investment into a renewable technology project in Eritrea

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