THE ROAD to SUSTAINABILITY HYUNDAI MOTOR COMPANY 2008 Sustainability Report

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THE ROAD TO SUSTAINABILITY HYUNDAI MOTOR COMPANY 2008 Sustainability Report

Before You Read

Writing Guidelines Hyundai Motor Company’s 2008 Sustainability Report is based on the most up-to-date G3 GRI (Third Generation of the Global Reporting Initiative). In selection of reporting items, we have embraced additional content beyond what the G3 GRI guideline requires. For more information on GRI guidelines applied to this report, please refer to the G3 GRI Sustainability Reporting Guidelines on page 111~114.

Collecting Relevant Data and Writing the Report We collected data from relevant departments in accordance with the HMC Sustainability Reporting Guidelines developed in 2003. In addition, we collected sustainability report data of domestic and foreign plants through Autoway, the HMC’s intranet system. In particular, we reviewed and edited this report in each phase of preparation including data collection, content preparation, and final review, in consultation with relevant departments on a regular basis.

The Scope of the Report This report covers quantitative results obtained from 2007 (the fiscal year of 2007) and qualitative events that occurred between January 2007 and April 2008. This report is prepared based on sustainability activities and performance reports made by the HMC headquarters, domestic plants, domestic sales points, service centers, distribution centers, training institutions, overseas plants and dealerships, R&D centers, and regional headquarters.

Degree of Compliance with the GRI G3 We self-declare that the 2008 Sustainability Report meets the requirements of the GRI G3 Level A+, which has been independently reviewed and approved by Deloitte. CONTENTS

Overview Economy People & Society

00 Before You Read 34 Main Business Activities 78 Employees Global Production Employee Status 08 Letter from Chairman & CEO Building Trust Global Sales 10 Letter from Vice Chairman & CEO Respect for Human Rights Enhanced Global Competitiveness 12 Materiality Analysis and Stakeholder Employee Education Employee Benefits Engagement 38 Process Innovation Industrial Safety and Health 14 2008 Highlights Strategic Enterprise Management(SEM) 15 Overview of HMC Supply Chain Management & Order to 85 Suppliers Mutual Cooperation 16 Stakeholder Discussion Delivery(SCM & OTD) Support for Green Management of Suppliers Customer Relationship Management (CRM) 92 Shareholders and Investors Plant Maintenance(PM) Shareholders’ Meeting and Dividend Corporate Philosophy Stock Dividend for Employees More Effective Communication with Shareholders 20 Corporate Philosophy Environmental Management Management Philosophy 95 Customers Vision Customer Satisfaction 44 Efforts to Minimize the Impact of Customer First Management Management Policy the Climate Change Marketing Mid-and Long-term Strategies Regional Responses Development of Alternative Fuel Vehicles 99 Social Contribution 22 Environment Management Fuel Cell Electric Vehicle(FCEV) Social Contribution Philosophy and Vision Environment Management Philosophy & Progress and Plans Improving Vehicle Fuel Efficiency Policy Social Contribution Activities in Korea Environmental Management Strategy and Global Social Contribution 55 Reduction of Gas Emissions System Regional Responses Environmental Management Organization Development of New Engines Appendix 24 Ethics Management 58 Increased Recyclability Ethics Management Philosophy Resource Circulation Target Establishment of Guidelines 111 GRI Index Expansion of Recycling Technology 115 Independent Assurance Statement Life Cycle Assessment (LCA) 26 Corporate Social Responsibility 116 Data Sheet Minimizing Use of Harmful Substances Overview of Corporate Social Responsibility 117 Index (Sheet & Graph) Organizational Structure to Support Hyundai Motor Company Worldwide 64 Clean Production 118 Corporate Social Responsibility Production Sites Fighting Against Climate 120 Reference Material How to Fulfill the Social Responsibility Change Resource Circulation 28 Corporate Governance and the Reduction of Pollutant Emissions Board of Directors Environmental Expenditures Board of Directors 2007 Activities of the Board of Directors Committees under the Board of Directors Ethics Committee 이

Hyundai Motor Company has made continuous effort to realize dream come true. We are now driving our effort to open up the new world where convenience and 룸 happiness reside through development of new cars. [irum]

Irum means achievement. An achievement is something which someone has succeeded in doing, especially by superior ability, special effort, and great courage. Achievement: 1) An obtaining by exertion; successful performance; accomplishment 2) A great or heroic deed

From the research and development stage to recycling process, HMC will endlessly strive to lessen detrimental effect on the environment. 푸 르 름 [pureureum]

Pureureum means evergreen. An evergreen is a denoting plants that does not shed its leaves seasonally. Often used as a metaphor. Evergreen: 1) Trees that bear leaves all the year around 2) Continually fresh or self-renewing; often used metaphorically 나 눔 [nanum]

Nanum means share. Share means the full or proper portion allotted or contributed by an individual or group. Share: 1) A part allotted, contributed, or owned by an individual or groups 2) Portion; section; division We are well aware that love and trust from executives, employees, suppliers, shareholders, investors, customers, and communities will be the basis for our aspiration to become the world’s leading automaker. 8 Letter from Chairman & CEO HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 9

Sustainability and Competitiveness for the Future

We, at Hyundai Motor Company, believe our global success is founded on the support of our stakeholders - customers, shareholders and suppliers. The strong and continuous support of all our stakeholders is critical to realizing our aspirations of global leadership in the auto industry.

By fulfilling our environmental and social responsibilities we strive to be a model corporate citizen in every community where we conduct our business. And we are making progress to achieve global integration and alignment in our efforts to address key environmental issues such as climate change. Moreover, we are actively engaged in a variety of social contribution initiatives to meet the highest standards of corporate citizenship. We believe such efforts will set the course for our pursuit of sustainability.

In May 2008, we inaugurated the “Corporate Social Responsibility Committee” which promotes sustainable management by seeking to balance qualitative and quantitative growth. Our sustainability management initiative encourages stakeholder participation to ensure a wide range of views and opinions are reflected in our business and corporate activities.

In the pioneering spirit of challenge, we are actively taking the lead to promote change and innovation which will generate a competitive edge. And we believe in the importance of pursuing harmony and co-existence with all of our stakeholders for mutual benefit.

We genuinely value your comments and ideas on our efforts to uphold the values of sustainability. We would like to thank all stakeholders and concerned parties for your continued interest and support.

July 2008

Mong-koo Chung Chairman & CEO 10 Letter from Vice Chairman & CEO

Our Efforts towards Sustainability

We would like to thank all our stakeholders for their continuous support and valuable contribution. It is our pleasure to present this report as evidence of our determination to fulfill our social responsibilities.

Climate change and surging oil prices, which have precipitated a new energy crisis, have drawn global attention to sustainability issues. To reduce the industry’s dependence on fossil fuels, automotive manufacturers have been seeking alternative solutions which incorporate sustainability principles into management while at the same time facing intense competition. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 11

It is our pledge to become a sustainable enterprise and a global automobile manufacturer responsive to the expectations of our stakeholders. By embracing environmental and social values, we create added economic value and promote growth while remaining attuned to changes in external and internal management conditions.

We are continuously expanding and improving our sustainability management system and our achievements have earned recognition from many independent organizations. We have won major sustainability awards including the 2007 Presidential Grand Prize for National Environmental Management, the 2007 Grand Award for Excellent Sustainability Management and the 2007 Korean Environment Award for the Automobile Industry.

Through the harmonious balance of qualitative and quantitative development goals, we will continuously contribute to improving the quality of the lives of our stakeholders everywhere. Furthermore, we promise our best efforts to become a global leader in preserving the earth’s ecosystem through the systematic implementation of sustainability management.

Our efforts to address environmental issues are on the same page as our commercial success. We continue to strengthen our strategies in global management through the quality of our products and in our brand building, with the goal of creating added economic values, while at the same time becoming proactively involved in global environmental initiatives.

With the rising awareness of environmental issues around the globe, we aim for full compliance with local and international environmental regulations. Moreover, the development and supply of environment-friendly automobiles such as hybrid electric vehicles (HEV) and fuel cell electric vehicles (FCEV) are a strategically important response to the depletion of petroleum resources and global warming.

We are striving to attain the highest standards in sustainability management and are continuously enhancing our internal organizational structures and strategies. As this report is designed to form the basis of a more comprehensive dialogue with our stakeholders, I am greatly thankful for the support of our stakeholders.

July 2008

Dong-jin Kim, Ph.D. Vice Chairman & CEO 12 Overview

Materiality Analysis and Stakeholder Engagement

Materiality Analysis

We have published our annual sustainability report for six consecutive years. However, we are well aware that there is a gap between perceptions of HMC and readers over the quality and quantity of information contained in the report. Therefore, in 2008, we conducted a materiality analysis on the 2008 Sustainability Report to identify information and issues that are essential to stakeholders. Also, we included our sustainability management results and practices in the report. In order to become a leading global automaker in sustainability management, we will continue to analyze and review the materiality of reporting items to prepare a sustainability report that accommodates stakeholders’ perspectives and needs.

● Materiality Analysis One of the main objectives of the sustainability report is to provide stakeholders with essential information on the company. In order to ensure that readers and stakeholders trust and accept the sustainability report, we conducted a materiality analysis on reporting items related to our sustainability management outcomes and practices. We used the result of the materiality analysis in selecting reporting items that might affect stakeholders’ decision-making process. Moreover, we have referred to sustainability reports of domestic and foreign industry leaders. We reflected the feedbacks and comments of stakeholders through the 2007 HMC Sustainability Report Review Committee and stakeholders’ meetings in 2008.

Key issues selected by materiality analysis C A • Issues of low impact and high concern • Social responsibility • Global/local community contribution • Development of environment-friendly strategies and initiatives vehicles • Reduction in hazardous wastes/emis- • Response to the United Nations Frame- sions reduction program work Convention on Climate Change • Respect for employee diversity the Climate Change (UNFCCC) Degree of concern to stakeholders • Industry-academia collaboration to • Mutually beneficial labor relations nurture talents • Improved corporate governance • Support for cultural and sports events

• Environment-friendly procurement • Encouraging suppliers to adopt environment-friendly management • Mutually beneficial cooperation program • Customer-oriented management • Reinforced auto safety

Current or potential impact on the company A: Issues of high impact and high concern B: Issues of high impact and low concern C: Issues of low impact and high concern HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 13

Stakeholders Engagement

HMC interacts and builds relations with various stakeholders through cars as a medium. Our management philosophy is to grow together with stakeholders based on mutual trust and cooperation.

● Our Stakeholders Stakeholders refer to individuals or groups who are affected by business activities or affect business activities. Following is the list of stakeholders that HMC recognizes.

Identification of stakeholders Shareholders Customers and investors

Executives and Global society employees Economy

Environment Community

Local Suppliers communities

Non- government Government organizations

● Communication with Stakeholders In relations with stakeholders, our ultimate goal is to build effective communication on trust based, and to grow and develop together. In this regard, we are in the process of identification of stakeholders’ major concerns and expansion of communication channels. In 2008, we developed the 2007 Sustainability Report Review Committee into a consultative body with stakeholders in order to select important sustainability issues, and our executive management held a meeting with stakeholders to reflect their views in the management’s decision-making process. 14 Overview

2008 Highlights

● National Environmental Management Grand Prize Winner ● Sponsorship for the EXPO 2012 YEOSU KOREA The Ministry of Commerce, Industry, and Energy, and Ministry of We helped Yeosu win the bid to host the 2012 World Expo. Under Environment promotes environmental management practices on yearly basis the theme of "The Living Ocean and Coast," the EXPO 2012 YEOSU KOREA aims by awarding the National Environmental Management Award to domestic to propose and explore ways to address global environmental problems such companies with outstanding environmental performance. Well-recognized for as ocean contamination and sea-level rise caused by climate change. our environment-friendly business activities, we won the 1st prize in this award. As a corporate citizen, we actively supported Yeosu to win the bid to host We also won the 2007 Grand Awards for Excellence Sustainability manage- the 2012 World Expo in collaboration with the Korean government, based on ment and the 2007 Korea Environmental Award in automobile category. This the recognition that the theme of the Expo is relevant to our sustainability award recognizes that we have respected human values and dutifully fulfilled management. the social responsibility by adopting environment-friendly business practices at As the Honorary Chairman of the EXPO 2012 YEOSU KOREA Bid Committee, home and abroad. Chairman Mong-koo Chung visited around the world to help Yeosu win the bid We have developed and implemented environmental management strategy in to host the EXPO 2012 YEOSU KOREA. He organized a taskforce team, opened all areas of the automotive industry value chain by declaring our commitment a secretariat office in Paris, France, and used HMC offices and sales network to preserve environment in our global business activities in 2003. Particularly, around the world to support the World Expo Bid Committee. When Yeosu finally we have focused on developing innovative technologies to mass-produce eco- won the bid to host the 2012 World Expo, we felt a sense of accomplishment friendly cars, implement a clean production system, introduce a resource recy- as a private company contributing to the national and regional growth. In the cling system, and build a green partnership with our suppliers. future, we will continue to support the national and regional development proj- We believe that proactive environment-friendly management can enhance ects, based on the recognition that improved national image leads to higher corporate values and contribute to making a better future of the earth and corporate values of HMC. promoting the happiness of mankind, and will strive to create an affluent and

sustainable society. ● Corporate Social Responsibility Committee In April 2008, the Hyundai Motor Group Corporate Social Responsi-

● The 40th Anniversary bility Committee was established to meet the global standards for responsible The year 2007 marked the 40th anniversary of HMC. Since the corporate citizenship, fulfill the social responsibility, and respond to government foundation in 1967, we have contributed to Korea's economic growth as the policy for the disadvantaged. In addition, each of HMC, Kia Motors, Hyundai first auto manufacturer in Korea. In 1976, nine years after the foundation, we Mobis, Hyundai Steel, and Hyundai Hysco has established its own corporate exported our first proprietary model Pony to Ecuador. In 1986, we exported social responsibility committee to fulfill the social responsibility as a corporate Excel to the U.S. and laid the basis for global management. In the 2000s, we citizen. built production bases in China and the U.S., constructed plants in Europe and The HMC Corporate Social Responsibility Committee aims to lay the basis for Russia, and exported our proprietary engine technology to many countries, be- socially responsible management, and help us gain trust from the government coming a leading global automaker. Particularly, in 2007, we sold a total of 2.6 and public. The committee further assists us to become a leader in sustainabil- million vehicles, the highest in our history. ity management, and grow in terms of both quality and quantity. To this end, In the process of rapid growth, we have recognized that we not only have to we have selected three major areas to focus on: trust-based management, create profits but also contribute to social development as a responsible cor- environmental management, and social contribution. Also, we plan to continue porate citizen. Based on this recognition, we have pursued a balance between our development of environmental management and ethical management. interests of all stakeholders and sustainable development. In addition, we have been a leader in providing sustainable mobility by developing eco-friendly vehicles and building mutually beneficial labor relations. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 15

Overview of HMC

Since the foundation in 1967, we have led the automobile industry in Korea. The year 2007 marked our 40th anniversary. When HMC was founded, no one expected that Korea would have an auto manufacturer with a proprietary technology. However, we have grown into a leading global automaker with the prominent initiatives and strenuous efforts. With 40 years of technology leadership and potential acquired during the development of the Korean economy and its domestic automobile industry, we fulfill our social responsibility by contributing to creating a society, where nature and humanity can peacefully co-exist, and promoting sustainable development worldwide

Assets (As of December 31, 2007)/(unit: billion won) Year 2005 2006 2007 Total assets 26,661 26,430 29,587 Revenue 27,384 27,335 30,489 Net income 2,349 1,526 1,682 Total liabilities 11,608 10,379 11,384 Stockholders Equity 15,053 16,051 18,203

Production and Sales

Production (As of December 31, 2007)/(unit: number of vehicles) Sales (As of December 31, 2007)/(unit: number of vehicles) Category location 2006 2007 Category 2006 2007 Domestic ▒ Ulsan 1,289,313 1,352,812 Domestic ▒ Domestic demand 580,288 624,227 ▒ Asan 279,760 296,600 ▒ Exports (Excluding CKD) 1,030,774 1,076,070 ▒ Jeonju 49,195 57,315 ▒ Total 1,611,062 1,700,297 ▒ Total 1,618,268 1,706,727 Overseas ▒ HMI(India) 301,590 338,755 Overseas ▒ HMI(India) 298,980 326,899 ▒ BHMC(China) 290,088 231,888 ▒ BHMC(China) 290,011 231,137 ▒ HMMA(USA) 236,773 250,519 ▒ HMMA(USA) 236,177 251,022 ▒ HAOS(Turkey) 60,870 90,180 ▒ HAOS(Turkey) 60,660 91,270 ▒ Total 889,321 911,342 ▒ Total 885,828 900,328

1,706,727 911,342 624,227 1,976,398 Domestic Overseas Domestic Export and market overseas plants 16 Overview

Stakeholder Discussion

The Chairperson Young-Woo Park (President of Business Institute of Sustainable Development)

Stakeholders Il-Chung Kim (Department of International Trade of Donguk University, Professor) Jong whan Noh (General manager of Climate Change Mitigation Department of Korea Energy Management Corporation) Young Jae Ryu (Sustinvest, CEO)

Hyundai Motor Company Jae Kook Choi (President of Hyundai Motor Company)

Jae Kook Choi (HMC, President)

“Raising both tangible and intangible value is essential to achieve sustainability”

Young-Woo Park (President of Business Institute of Sustainable Development) | HMC prepared lems of labor relation as a seasonal risk. In case of HMC’s labor issues, the this discussion to reflect various stakeholders’ opinions on the new sustainabil- public perception of labor union as stubborn group is also considered as one ity report that will be published. In 2007, the Review committee of sustainabil- of the risk factors. Therefore, we encourage HMC to share long-term plans ity report was established to serve as the only independent source of providing with more open-minded. Thirdly, for mutual development with suppliers, HMC opinions on the report. However, starting from this year, HMC extended its should establish set of long term objectives and strive to extend the scope of scope to become inclusive of stakeholders’ opinions. mutual cooperation program.

Jae Kook Choi (HMC, President) | Following the establishment of the Review Com- Jae Kook Choi | For betterment of the brand, corporate culture, employment mittee of sustainability report, increasing number of insiders asserted the im- satisfaction level, supplier relations should all be taken into consideration. It portance of embodying stakeholders’ opinions. In response, we are planning to has been true that quality management and global management accounted for embrace their opinions both in preparation of our management plans as well as HMC’s successful growth. Now, brand management will be our focus and we in our-decision making process. Based on the quality management and global will find exemplifying cases to benchmark. Last year, we successfully ended management, we are now focusing on brand management and also trying to wage negotiations without strikes and are currently working with unions to fin- enhance intangible values of our firm via fulfilling social responsibilities as well ish this year’s negotiation peacefully. HMC runs the Labor-management Com- as environmental management. mittee that consists of independent experts recommended by both the labor union and management. Labor relation is not only critical to public image of

Young Jae Ryu (Sustinvest, CEO) | In the past, the value of corporation was mostly HMC but also influential to the amount of supplies. The executives fully under- determined by the value of tangible assets. Now the situation is reversed. Al- stand the needs to enhance labor relation for HMC’s further growth. In addition, most 80% of the firm’s value now consists of intangible assets such as brand HMC actively implements cooperative management in order to grow together image, labor relation and others. In response to this new trend, rising number with its suppliers, building partnerships based on mutual trust. of investors is showing interests in intangible assets.

Still, HMC could still be improved in three aspects. First aspect is regarding Jong whan Noh (General Manager of Climate Change Mitigation Department of Korea Energy Manage-

corporate governance. Disclosing profiles and current status of Ethics Com- ment Corporation) | As the climate change is becoming a major issue, there are mittee with respect to its neutrality and professionalism would be perceived ongoing discussions on who should be responsible for such changes. Theoreti- as an earnest effort to react to external stakeholders’ interest and would open cally, the end consumer is regarded as the responsible member of the crisis. a ground for better communication. Secondly, most investors recognize prob- However, it is practically impossible to hold all the end consumers accountable. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 17

Young-Woo Park Young Jae Ryu Jong whan Noh Il-Chung Kim (President of Business Institute of Sustain- (Sustinvest, CEO) (General Manager of Climate Change (Department of International Trade of able Devleopment) Mitigation Department of Korea Energy Donguk University, Professor) Management Corporation)

“Diverse efforts including accretion of transparency, observance of principal, environmental and ethics management, and maintenance of mutual cooperation with suppliers”

Therefore, manufactures are starting to take more and more blames for the should be able to impress the readers by demonstrating its willingness for climate change. In case of automobile industry, companies were not respon- innovation and changes. sible for behaviors of individual drivers. Nowadays, firms are expected to inform the drivers of the severity of climate change. Jae Kook Choi | Although HMC has strong tangible assets, the under-performance of stock verifies that we still need more improvements especially Jae Kook Choi | HMC puts more and more emphasis on climate change. something intangible. We would give our full consideration to inviting stake- Unlike the past, it is a fair statement to conclude that cars are one of the holders from labor unions to our stakeholder meetings. Also, many external major factors incurring climate change. Therefore, no HMC’s business ac- directors give us the advice that we should improve both tangible and intan- tivities would persist unless careful consideration is given to climate change gible values that are essential to sustainability of corporation. HMC would issue. HMC also needs to prepare for possible taxation based on different continue to maintain its transparent and ethical management via improving

CO2 emission level. HMC’s R&D center is thus working on improving both the level of transparency, adhering to principles and establishing mutually performance and CO2 emission of cars. It intends to produce hybrid cars beneficial partnership with suppliers. starting from next year. Such early response to climate change would become a basis for our future success. Young-Woo Park | The most important factor to be considered in preparation of the report is communication. Still, we have not yet reached a desired level

Il-Chung Kim (Department of International Trade of Donguk University, Professor) | Having more of understanding with stakeholders from lack of conversation. Stakeholders conversation with citizens would certainly be beneficial, creating less con- find themselves not being fully informed about HMC’s plans and objectives flicts in case the problem has risen. It would also be good idea to invite to address their concerns. From now on, we hope that this discussion was representatives from labor unions to share opinions in stakeholder meet- instructive to HMC reminding the importance of conversation with stake- ings due to public’s negative perception on labor union. I have been driving holders. Through active communication with stakeholders, HMC practice Hyundai Sonata for 9 years, but including the minute cost for repair, I am still customer impression management to become a respectable HMC. very satisfied with its features and performance. As a result, I have built a trust that HMC is an excellent automaker. In spite of its excellence in quality management, the under-performance of stock is perhaps the result of HMC’s organizational structure. Ultimately, HMC needs to alter its organizational structure to improve brand image. Also, through the use of CSR report, HMC Corporate Philosophy

As a company trusted by all interested parties, Hyundai Motor Company strives to fulfill its social responsibility and translate its sustainability commitment into action.

Corporate Social Responsibility Committee and Ethics Committee The HMC Group Corporate Social Responsibility Committee and HMC Corporate Social Responsibility Committee were established in order to fulfill the social responsibility as a global corporate citizen and meet the diverse needs of interested parties. In addition, the HMC Ethics Committee was established to improve internal transparency and explore ways to promote ethical management.

page 26 20 Corporate Philosophy 24 Ethics Management 28 Corporate Governance and the Board of Management Philosophy Ethics Management Philosophy 28 Directors Vision Establishment of Guidelines Board of Directors Management Policy 2007 Activities of the Board of Directors Mid-and Long-term Strategies 26 Corporate Social Responsibility Committees under the Board of Directors Overview of Corporate Social Responsibility Ethics Committee 22 Environmental Management Organizational Structure to Support Corporate Social Environmental Management Philosophy & Policy Responsibility Environmental Management Strategy and System How to Fulfill the Social Responsibility Environmental Management Organization 20 Corporate Philosophy

20 Corporate Philosophy 22 Environmental Management Corporate Philosophy 24 Ethics Management 26 Corporate Social Responsibility 28 Corporate Governance and the Board of Directors

We have developed and implemented our corporate philosophy including management philosophy, vision, policy, and strategy to grow together with stakeholders and contribute to improving the quality of life around the world. With "the Spirit of Creative Challenge," which has so far guided HMC, we will strive to be a global leader in implementing sustainability management.

Management Philosophy

With the spirit of creative challenge, we contribute to create a more affluent lifestyle for humanity, and are contributing to the harmony and co-prosperity with shareholders, customers, employees and other stakeholders in the automobile industry.

The spirit of creative challenge has been a driving force in leading HMC today. It is the perma- nent key factor for HMC to actively respond to change in the management condition and seek creative and self-innovative system. With the spirit of creative challenge, we create profits, the primary objective of a private enterprise. Furthermore, we take the responsibility for the environment and society we belong to, and offer sustainable mobility in order to implement our corporate philosophy and provide benefits to all stakeholders including shareholders, customers, executives, employees, suppliers, and communities.

Vision

We announced "Innovation for Customers" as our mid-to long-term vision with five core strategies: global orientation, respect for human values, customer satisfaction, technology innovation, and cultural creation. We desire to create an automobile culture of putting customer first via developing human- centered and environment-friendly technology innovation.

Global orientation Growing as a leading global automobile maker, building trust and respect with the global community Respect for human values Cultural creation Becoming a leader in Creating an automobile developing environment culture where people -friendly technology to are respected and contribute to the Innovation valued prosperity of humanity for Humanity

Customer satisfaction Technology innovation Improving customer satisfaction Developing an innovative by putting customers first technology centered in all aspects on people HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 21

Management Policy

Based on the respect for human dignity, we make efforts to meet the expectations of all stakeholders including customers and business partners by building a constructive relationship amongst man- Trust-based agement, labor, executives and employees. Also, we focus on communicating our corporate values both management internally and externally, and gaining confidence from all stakeholders. Particularly, in 2007, management and labor of HMC finished wage negotiations without strikes, based on mutual trust. In addition, all executives and employees make efforts to acquire knowledge on auto industry fields to provide the highest quality and On-site Transparent service to customers. We endeavor to focus on on-site management by concentrating our business capacity management management on production and sales bases. Our fields include not only Korean business sites but also overseas production and sales bases. This on-site management played a significant role in supporting Yeosu to successfully win the bid to host the 2012 World Expo. In 2006, some of HMC executives were charged for illegal financial transaction. The case was closed with the court order of probation and community services in extenuation Trust-based management • Trustworthiness of the facts; most of the funds were used inevitably for business management purposes and damages were • Trust between management-labor, employer-employee, mostly recovered. In 2007, we established Ethics Committee in order to prevent the recurrence. And in company-customer relationship 2008, we established Corporate Social Responsibility Committee for the further efforts on trust-based man- Transparent management agement, environmental management, and social contribution. We also developed the institutional frame- • Higher transparency in all areas of business • Transparency in transaction and fair trade work to make management more transparent since we established and announced the Ethics Charter and • Promotion of ethics and enhancing ethics management Guidelines for Employees' Behavior in 2001. We will continue to focus on business transparency. system

On-site management • Cultivation of on-site knowledge, and raising challenging spirit of field staffs. Mid-and Long-term Strategies • Concentration on management capacity on industrial sites • Management strategy based on the sites and promotion of R&D We developed five mid-and long-term strategies: global management, higher brand values, busi- • Establishment of the immediate response communication ness innovation, environmental management, and strengthening product competitiveness. Especially, we system selected environmental management as one of our strategies to meet the needs of our stakeholders and the society we belong to. We also intend to promote sustainability development and preservation of the environment.

Global management With global management, we strive to become one of the top 5 automakers.

Strengthening Higher brand product values We focus on strengthening product competitiveness to compete competitiveness With aggressive marketing and better product with world class automakers in the global market. quality, we aim to create brand values as one of the top 5 global automakers.

Environmental Business We seek to develop and implement environmental management management innovation We pursue business innovation to improve strategy for the improvement of our corporate competitiveness. product quality and productivity. 22 Corporate Philosophy

20 Corporate Philosophy 22 Environmental Management Environmental Management 24 Ethics Management 26 Corporate Social Responsibility 28 Corporate Governance and the Board of Directors

In 2003, we announced environmental management philosophy and global environmental management policy, and laid the foundation for environmental management. Also, we apply our environmental management strategy across all areas of the value chain. We will adhere to environmental management and sustainability development as a global automaker, promoting environment preservation and taking social responsibility for lessening environmental impacts from our business activities.

Environmental Management Philosophy & Policy

In 1995, we became the first Korean automaker to introduce environmental management. Since then, we have developed environmental management philosophy and global environmental management policy that embody our will to promote environmental management. In June 2003, we officially declared the environmental management philosophy and global environmental management policy. Based on these, we have improved our environmental management system, presented executives and employees with consistent principles for environmental management, and informed external stakeholders of our intention to fulfill the social responsibility of promoting environmental management.

Society ● Environmental Management Philosophy We respect human values by protecting the environment and creating a society, where humanity and nature peacefully co-exist, and accomplish the social responsibility as a responsible corporate citizen. Environment Human ● Global Environmental Management Policy As a responsible corporate citizen, we respect for human and strive to create a sustainable society. We preserve the global environment by implementing the following global environmental management policy.

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

• Promote the development and distribution of environment-friendly products.

• Promote sustainable use of energy and reduce emissions in all processes of product from development to production, sales usage, and disposal

• Endeavor to provide all employees with environmental training programs, support suppliers in environmental management, and contribute to public welfare

• Comply with all domestic and international environmental regulations and agreements. Continue to improve our environmental management efforts and publicly disclose our performance.

Environmental Management Strategy and System

● Environmental Management Strategy We established five core tasks in order to effectively and consistently implement environmental management with clear objectives and strengthen our capacity to respond to global environmental issues and regulations. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 23

Response to · Reduction in automobile green house gas emissions climate change · Development and production of alternative fuel vehicles · Diversification of vehicle fuel sources Adoption of · Reduction in green house gases emitted from the workplace Reduction of resource hazardous · Higher recycling rate recycling · Adoption of global standards to reduce four major heavy metals substances · Environment-friendly vehicle disposal a system · Reinforcement of hazardous chemical materials management · Zero wastes

Establishment Reduction of of environmental · Reduction in vehicle emissions air pollutants management · Establishment of environmental KPI/ environmental accounting system · Reduction of air pollutants from the workplace system · More effective communication with internal and external stakeholders · Establishment of information system on global environment regulations · Strengthening green partnership with suppliers

● Environmental Management System Based on our environmental management principles, we develop and implement environmental management objectives and strategies for the entire value chain of the auto industry including R&D, procurement, production, logistics, sales, and customer service.

• Philosophy & Policy - Establishment of environmental philosophy & policy - Declaration of global environmental management • Organization & Strategy - Establishment of environmental management strategy - Operation of environmental committee Philosophy & Policy • Management System - Environmental accounting - Establishment of communication channels with stakeholders - Sustainability training for all employees - Sustainability report publication • R & D - Environment friendly design - Fuel economy & vehicle emissions - Expansion of Recycling Organization & Strategy - Environmental information system - Developing environmentally friendly vehicles • Purchasing - Establishing green procurement system - Establishing SCEP - Logistics optimization Management System • Production - Development of cleaner production system - Expansion of ISO 14001 certification - Development of integrated environmental management system - Establishment of environmental management strategy Marketing Customer R & D Purchasing Production • Marketing & Sales - Green marketing - Green sales & Sales Service • Customer Service - Green service - Supporting Customer Service Providers’ EMS

HMC Environmental Management Organization

We organized the Environmental Committee, which is the highest decision-making body with regard to environmental management, to facilitate swift decision-making and systematically implement environmental management. The Hyundai Motor Company's Environmental Committee is chaired by Vice Chairman and CEO, and composed of three strands: the Environmental Product Committee, Environmen- tal Production Committee, and Recycling Committee. Each committee has subcommittees, the total of eleven, classified by various environmental issues to promote collaboration among organizational units.

Environmental Product Environmental Recycling Committee Committee Production Committee (Chair: Domestic Sales Director) HMC (Chair: R&D Director) (Chair: Ulsan Plant CEO, Head of Manufacturing - Compliance Strategy for Domestic policy and Environmental Committee Division) - Fuel Efficiency subcommittee regulation (Strategy to respond to domestic laws Review and adjust enterprise-wide - Emissions subcommittee - Green House Gases subcommittee and regulations) - Compliance Strategy for Overseas policy and environment-friendly policy - Eco-friendly Vehicles subcommittee - Wastes and Emissions subcommittee - Recycling, technology development subcom- - Four Major Heavy Metals subcommittee regulation (Strategy to respond to overseas laws (Chair: Vice Chairman&CEO) mittee (Strategy to develop recycling technology) - Hazardous Substances subcommittee and regulations) - Light-weight Car subcommittee 24 Corporate Philosophy

20 Corporate Philosophy 22 Environmental Management Ethics Management 24 Ethics Management 26 Corporate Social Responsibility 28 Corporate Governance and the Board of Directors

We implement ethics management to gain trust from stakeholders and fulfill our social responsibility. We developed the Ethics Charter, Workplace Ethics, and Guidelines for Employees' Behavior. Currently, we conduct Work Management Principles and Anti-bribery Policy. In addition, we offer ethics education to executives and employees to help them make a right decision in the face of an ethical dilemma. We conduct a cyber inspection and operated the Ethics Committee to ensure compliance with ethics management principles.

Ethics Management Philosophy

Transparency and trust are important criteria to evaluate a business. We implement ethics management to ensure that our executives and employees make an ethical decision in the face of an ethical dilemma. Based on ethics management, we rectify unethical elements of business activities to improve corporate values and competitiveness. Upon ethics management, we gain confidence from customers, and suppliers while reducing time and cost for making transactions and improving sales figures. In addition, ethics management help our executives and employees feel a sense of fulfillment from their work, become more loyal to the company, and voluntarily contribute to the growth of the company. From a long-term perspective, ethics management supports HMC to improve our business performance.

Establishment of Guidelines

● Ethics Charter

Contribution to the nation and society | We contribute to the national economy through ongoing creation of jobs and trustworthy payment of taxes. We strictly comply with all laws related to the environment, spearheading the effort to protect the environment and contributing to society through cultural and welfare initiatives.

Contribution to the nation Enlargement of customers’ and shareholders’ rights | We protect customer rights and value by and society optimizing products and services, safeguarding customer information, and fulfilling our promise made to Enlargement of Establishment of customers’ and customers. We maximize management efficiency to ensure that our financial structure is viable, safe- transparent shareholders’ management Ethics guarding and increasing shareholders’ assets. rights Charter

Respect Respect for human dignity and cultivation of competent human resources | We respect the indi- Establishment of for human dignity vidual employee as an independent being and created a sophisticated corporate culture based on mutual partnership with and cultivation of suppliers competent human trust and understanding, while striving to prevent sexual harassment at work. We actively seek to increase resources our employees’ sense of ethics and support them structurally with a long-term view to cultivate them into independent, creative and effective individuals. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 25

Establishment of partnership with suppliers | We actively support our suppliers with technical knowledge and management guidance to ensure co-prosperity in the long-term by securing competitiveness in the international market. We trade with the suppliers as on an equal footing and do not make any unfair demands by leveraging our position.

Establishment of transparent management | We deal with all tasks in a transparent manner and establish an honest corporate culture that garners trust by maintaining fair trade relationships that guarantee transparent transaction conditions with all business partners and customers. We reject all types of requests from all stakeholders that may infringe upon fairness and objectively in our operations and do not pursue unlawful profit.

● Regulation on Ethics at Work We established the Regulation on Ethics at Work related to relationships among employees, customers, suppliers, and competitors. Moreover, we developed detailed procedures and guidelines related to the actual practice for the Regulation on Ethics at Work. We specified basic rules and penalties for violations of the basic rules in the Regulation on Ethics at Work. We also established the Workplace Ethics Committee to effectively apply the Regulation on Ethics at Work.

● Guidelines for Employees' Behavior HMC executives and employees recognize that ethics is the source of corporate competitiveness and pledge to comply with the Ethics Charter to gain trust from the public and stakeholders. Accordingly, we promise the following: • We always behave with dignity and reject unethical requests in our daily life and in the workplace based on the pride and recognition that we are leading the Korean auto industry. • We comply with applicable laws, regulations and corporate policies while fulfilling our duties to create a corporate culture that abides by ethical rules and principles. • We value and protect customer information, tell only the truth to customers, and fulfill our promise with customers, without any exception. • We do not accept shareholder requests that contravene the fairness, and reject any unfair requests from executives or employees or via employees. • We protect confidentiality of information obtained during business activities and do not conduct action or make a relationship that interferes with the interest of the company and individuals. • We diligently fulfill our duties as a responsible firm and continuously contribute to advancement of the nation, society, and company.

* For more information on ethics management, please visit the website of the Cyber Audit Center for Ethics Management at http://audit.hyundai-motor.com. 26 Corporate Philosophy

20 Corporate Philosophy 22 Environmental Management Corporate Social Responsibility 24 Ethics Management 26 Corporate Social Responsibility 28 Corporate Governance and the Board of Directors

We established the Hyundai Group Corporate Social Responsibility Committee and HMC Cor- porate Social Responsibility Committee in order to fulfill its duties as a global corporate citizen and meet the various needs of stakeholders. Based on green and ethics management, we plan to take the social responsibility more systematically and pursue sustainable and balanced business growth.

Overview of Corporate Social Responsibility

Corporate social responsibility covers three areas: trust-based management, environmental management, and social contribution. For trust-based management, we will focus on enhancement of labor relations, mutually beneficial cooperation with suppliers, ethics management, and transparent management. As for environmental management, we will proactively respond to global trends and regulations related to the environment, as Korea's leading auto manufacturer. For social contribution, we plan to en- large our capacity and obtain expertise to effectively carry out global social welfare projects and participate in volunteering programs to contribute to development of communities.

Trust-based management • To gain trust from the government and public • Improving corpo- • To pursue growth both rate competitive- HMC in quality and quantity Corporate ness terms Social • Growing as a re- Responsibility • To become an industry Committee spected company Environmental Social leader in sustainability management contribution management

Organizational Structure to Support Corporate Social Responsibility

In April 2008, the Hyundai Motor Group Corporate Social Responsibility Committee was established, which implicates that we are willing to fulfill the social responsibility in our business activities, and shows strong commitments and developed interests. The Hyundai Motor Group Corporate Social Responsibility Committee consists of 10 executives and is chaired by Chairman and CEO Mong-koo Chung. We have regular meetings bi-annually and sub-committee meetings at each quarter to check the progress of corporate social responsibility plans and projects. Furthermore, we plan to establish an independent assessment group of external experts in order to objectively assess our corporate social responsibility progress and improve our social responsibility strategy. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 27

Hyundai Motor Group Corporate Social Responsibility Committee

Trust-based Management Manager • Labor relations • Procurement • Finance • HR • Audit

Domestic Corporate Environmental Management Manager Social Responsibility • Green products • Green production Committee • Resource recycling

Social Contribution Manager • The Headquarters • Plants • Domestic sales

Chairman: Vice Chairman: Vice Chairman President USA Plant Management Director Dong-jin Kim Jae-gook Choi

Czech Plant Management Director

Secretary: China Plant Management Director Global Corporate Head of Business Social Responsibility Strategy Planning Committee Group India Plant Management Director

Turkey Plant Management Director

Russia Plant Management Director

How to Fulfill the Social Responsibility

Our determination to accomplish the social responsibility management will be reflected on detailed strategic objectives and action plans by sections in the latter half of 2008. To this end, we established the HMC Corporate Social Responsibility Committee led by Vice Chairman Dong-jin Kim and other executives to practice the social responsibility management cross the company. In addition, we aim to organize an independent assessment group consisting of global social responsibility experts and opinion leaders by the end of 2008 and operate a CSR forum to objectively evaluate the outcomes of our CSR activities. We will pursue sustainable growth and development by exercising the social responsibility management and proactively meeting the needs of stakeholders in an environment- friendly manner. 28 Corporate Philosophy

20 Corporate Philosophy 22 Environmental Management Corporate Governance 24 Ethics Management 26 Corporate Social Responsibility and the Board of Directors 28 Corporate Governance and the Board of Directors

Under the Board of Directors, there are the Audit Committee and External Director Candidates Recommendation Committee. We further established the Ethics Committee in 2007.

Board of Directors

The Board of Directors makes decisions on matters defined by the laws or articles of incorporation, matters delegated by the general shareholders’ meeting, and key matters related to the basic guidelines for company operations and work execution. Moreover, we have the authority to supervise duties of directors and management, and consist of four internal directors and five external directors. The Board of Directors holds regular meetings and special meetings, if necessary.

Board of Directors

Ethics Committee

External Director Candidates Audit Committee Recommendation Committee

(As of December 31, 2007)

Name Remarks Internal Mong-koo Chung Chairman and CEO Member of the External Director Candidates Recommendation Committee Dong-jin Kim Vice Chairman and CEO Member of the External Director Candidates Recommendation Committee Yeo-cheol Yoon President and CEO - Jae-guk Choi President - External Dong-gi Kim Professor Emeritus, Business School, Korea University Member of the External Director Candidates Recommendation Committee, Committee Audit Committee Member Gwang-nyeon Kim Samhan LLC Member of the External Director Candidates Recommendation Committee, Audit Committee Member Il-hyung Kang BAE, KIM & LEE LLC Audit Committee Member Young-cheol Lim SHIN & KIM Audit Committee Member Sun Lee Professor, Department of Law, Soongsil University - HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 29

2007 Activities of the Board of Directors

Meeting Issues Approval 1st Regular Meeting January 25 39th annual financial statements Approved as drafted 39th annual report 2007 business and investment plans Convening of 39th Shareholders' Meeting and matters to be submitted to the Shareholders' Meeting - convening of the shareholders' meeting - balance sheet statement of profit and loss, surplus appropriation statement - revision of the articles of incorporation - appointment of directors - appointment of external directors who are members of the Audit Committee - ceiling on compensation for directors Limits on trading with the largest shareholder Limits on the amount of corporate bonds to be issued Payment guarantee for local financing for HMA (USD 200 million) 1st Special Meeting March 9 Appointment of a CEO (Director Dong-jin Kim) Approved as drafted Appointment of members of the External Director Candidates Recommendation Committee (Directors Dong-jin Kim and Dong-gi Kim) Prevention of conflicts of interest of a director (Director Dong-jin Kim) Establishment of an ethics committee 2nd Special Meeting March 30 Corporate bond issuance (total face value – 300 billion won) Approved as drafted 2nd Regular Meeting May 2 Establishment of an ethics committee Approved as drafted Payment guarantee for local financing for HMFC (USD 400 million) Overseas investment 3rd Regular Meeting July 26 Payment guarantee for local financing for HMMA (USD 100 million) Approved as drafted Changes in provisions on the Board of Directors Changes in matters delegated to the CEO Changes in provisions on the Audit Committee 3rd Special Meeting September 20 Stock buy-back Approved as drafted Stock disposal Transactions with subsidiaries 4th Regular Meeting October 24 How to exercise stock options (issuing new stocks) Approved as drafted Transactions with subsidiaries Investment in the largest shareholder (Hyundai Powertech, paid in capital increase – 15 billion won) Appointment of managers 30 Corporate Philosophy

20 Corporate Philosophy 22 Environmental Management 24 Ethics Management 26 Corporate Social Responsibility 28 Corporate Governance and the Board of Directors

Committees under the Board of Directors

The Audit Committee under the Board of Directors consists of four external directors. It is responsible for auditing finance and management of HMC. It has the authority to review reports on business management and financial status. The Audit Committee approves matters related to audit, the shareholders' meeting, directors, and the board of directors. It can access business and management information for auditing. The External Director Candidates Recommendation Committee consists of two internal directors and two external directors. External directors should be recommended by the External Director Candidates Recom- mendation Committee. The 2007 Shareholders' Meeting approved the directors' compensation ceiling of 10 billion won. From January 1 to December 31, 2007, total compensation paid to internal and external directors was 7.737 billion won.

2007 Activities of the Audit Committee Meeting Issues Approval 1st Meeting January 25 39th financial statements and annual report Approved as drafted Assessment of internal accounting control in 2006 Appointment of an independent auditor 2nd Meeting May 2 Business performance reporting on the 1st quarter of 2007 Approved as drafted Agreement with the independent auditor on non-audit service 3rd Meeting July 26 Business performance reporting on the first half of 2007 Approved as drafted Assessment of internal accounting control 4th Meeting October 24 Business performance reporting on the third-quarter Approved as drafted (accumulated) of 2007 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 31

Ethics Committee

We established the Ethics Committee, which monitors internal transactions and supervises transparency and ethics management. The Ethics Committee consists of five external directors, one executive, and two advisors (independent). It reviews matters related to the Anti-Trust and Fair Trading Act, transactions between parties in special relations specified in the Securities Trading Act, voluntary compliance with fair trading regulations, policies on ethics management and social contribution, and the Ethics Charter.

2007 Activities of the Ethics Committee Meeting Issues Approval 1st Regular Meeting July 18 Appointment of the Chairman of the Ethics Approved as drafted Committee Payment guarantee for local financing for overseas Hyundai Motor Companies Reporting - internal transaction - compliance program on fair trading - social contribution projects - implementation of the Workplace Ethics in the first half of 2007 1st Special Meeting September 20 Transactions with subsidiaries Approved as drafted 2nd Regular Meeting October 24 Guarantee for subsidiaries Approved as drafted Transactions with subsidiaries Investment in the largest shareholder Reporting - social contribution in the 3rd quarter of 2007 - internal transactions in the 3rd quarter of 2007 2nd Special Meeting November 29 Guarantee for subsidiaries Approved as drafted economy

HMC aims to continuously improve corporate values as well as profitability based on the expansion and stabilization of the global production and sales system.

Quality Competitiveness and Brand Values In 2007, HMC manufactured 2.6 million units of cars, the highest in history, in domestic and overseas plants, and sold the cars in the global market. Also, the accumulated number of cars sold in the U.S. market exceeded 5 million in 2007. In addition, HMC has successfully improved its quality competitiveness and brand values. For example, the Azera, Santa Fe, and Entrourage were named Best-in-Segment in Strategic Vision's Total Quality Index (TQS). HMC was ranked 72nd in the Interbrand Top 100 Global Brands.

page 36 34 Main Business Activities 38 Process Innovation Global Production Strategic Enterprise Management(SEM) Global Sales Supply Chain Management & Order to Delivery Enhanced Global Competitiveness (SCM & OTD) Customer Relationship Management(CRM) Plant Maintenance(PM) 34 Economy

34 Main Business Activities 38 Process Innovation Main Business Activities

HMC currently operates a sales network of 6,000 dealerships, 19 overseas factories and sales centers in 180 countries. Despite 2007 economic hardships due to the fluctuation of exchange rates, increase in the prices of oil and raw materials, we have manufactured and sold 2.6 million vehicles, the highest in HMC history, in many countries around the world.

Global Production

● Domestic Production In 2007, HMC started manufacturing a new model called i30 with sophisticated design and stable handling that successfully entered into the European market. Also, i30 has been very popular among younger generations in Korea. In addition, HMC opened a plant specialized in manufacturing luxury sedans in Ulsan and launched Genesis, a premium sedan, in order to compete in the global luxury sedan market. As for commercial vehicles, HMC increased the plant capacity to produce larger buses since supply fell short in Korea.

● Overseas Production In 1997, HMC built the Turkey Plant as the basis for its global business expansion. In 2007, the

1 Completion ceremony in the Turkey Plant Turkey Plant increased its production capacity from 60,000 to 100,000 vehicles per year and started to 2 Opening ceremony in the India Plant II manufacture Lavita, a model strategically designed to enter the European market. In early October 2007, 3 Ground-breaking ceremony in the Czech Plant HMC also opened the Second Indian Plant for i10 in order to take advantage of growing demands of automobiles in India. In addition, HMC used the Indian Plant as a global export outpost for strategic purposes. Currently, i10 is manufactured only in India but it is also sold in Europe, Middle East, and Latin America. In April 2007, HMC established Czech Republic Plant in Nosovice, a region close to the city of Ostrava, in Czech that can manufacture 300,000 vehicles per year. The Czech Plant is scheduled to produce cars from March 2009. In April 2007, HMC built the CKD Plant with an annual capacity of 50,000 vehicles to establish a production base in Brazil, the largest automotive market in South America. In December 2007,

1 HMC signed the Letter of Intent with the State of Saint Petersburg in Russia to build a factory that can manufacture 100,000 vehicles per year.

● 2008 Production Plan In 2008, HMC plans to stabilize its global production system and strengthen competitiveness of factories. We expect overseas production will account for more than 45% of the total production based on the establishment of the second Chinese plant, and stable production in the United States and India. 2 Particularly, second plant in China is a preparation to meet growing demand of vehicles after the Beijing Olympics. In addition, we plan to expand our organization and workforce to support the global production system. To this end, we will develop a localization plan to recruit and nurture competent local engineers to provide better technical services and improve productivity at the local level.

3 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 35

2007 status of enlargement of overseas production sites Plant Item Capacity (annual production) Czech Plant Broke the ground in April 300,000 vehicles CKD Plant, Brazil Completed in April 50,000 vehicles Russia Plant Singed the Letter of Intent in December 100,000 vehicles

Accumulated number of cars sold in the U.S. market

(unit: 10,000 vehicles) July 17, 2007 5 million

5 million

4 million 2005

3 million 4 million 1992 2 million 2002 2 million 3 million

1 million 1990 1 million

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Global Sales

● Domestic Sales In 2007, HMC sold total of 624,227 units of vehicles, a 7.6% increase from previous year and achieved our domestic sales target of 600,000 units, first time since 2003. The company has attained the domestic market share, measured by units sold, of 50% for 4 consecutive years. By model, Sonata, Elantra, and Azera ranked first, second, and third, respectively in sales figures. Espe- cially, newly released Sonata Transform model with advanced functional technologies and convenient functions, sold 119,133 units last year. It was the highest Sonata sales figure since 1999. In addition, i30 1 Dealership in China Hatchback, which was launched in July 2007, a model targeted for Europe, was sold an average of 2,000 2 Dealership in Russia units per month, acquiring stable customer base. Grand Starex released in May, 2007 sold 51,392 units last year to facilitate mini bus market in Korea.

● Overseas Sales In 2007, HMC increased the sales by 3.1% from previous year and sold 1,986,070 units of vehicles in overseas markets. We have analyzed and developed models for each region in strategic terms, 1 considering purchasing trends of consumers in each region. Through the strategic sales, we have exported 1,076,070 units to overseas markets, and sold 910,000 units manufactured from overseas factories. Particularly, in 2007, HMC achieved aggregate sales of 5 million units in United States since we first exported Excel in 1986. Currently, Elantra (1.23 million units) and Sonata (1.02 million units) are best-selling cars in the American market. Moreover, since 2000, we started to export premium cars such as Santa Fe (580,000 units) and Azera (138,000 units) to enhance our brand value and profit. HMC now strives to

2 become a luxury brand by selling premium luxury cars such as Genesis and Veracruz. 36 Economy

34 Main Business Activities 38 Process Innovation

● 2008 Sales Plan In 2008, HMC plans to sell 670,000 units of cars in the Korean market and export 1.13 million units of cars. Also, we plan to manufacture a total of 3.11 million units of cars including 1.8 million units in domestic plants and 1.31 units in overseas plants, which is a 20 percent increase year-on-year. To this end, HMC will continue to focus on global and customer-oriented management, and make more efforts to have the first-mover advantage in emerging markets including the post-BRICs economies.

Enhanced Global Competitiveness

In 2007, despite business difficulties such as the strong Korean currency and intensifying competition in overseas markets, HMC has made a continuous effort to improve quality. Therefore, we gained favorable comments from major auto magazines and quality assessment organizations overseas. More- over, HMC ranked among the 2007 Top 100 Global Brands selected by Business Week and Interbrand, and were valued at 4.5 billion dollars. HMC's ranking has increased, since it became the first Korean auto maker to be one of the Top 100 Global Brands in 2005. We plan to increase its quality competitiveness and brand power based on its global production line-up, local production in major auto markets around the world, and strong sales network worldwide.

● Higher Quality Competitiveness HMC has taken advantage of research centers through the partnerships in the U.S., Europe, and Japan along with the Nam-Yang R&D Center in Korea. Based on the R&D network, HMC successfully developed and launched i30 and i10 for regional markets. Moreover, after four years of investment and research process, we developed and launched Genesis, a highest technology luxury sedan. We also succeeded in developing three mid-and large-sized commercial diesel engines using our propri- Ranked 7th in the 2007 Annual Car Reliability Survey (Consumer- etary technology, building a full diesel engine line-up ranging from passenger car diesel engines to small Reports, April 2007) commercial diesel engines and large commercial diesel engines. In 2008, HMC plans to continuously promote quality-oriented management. By adopting innovative quality management, we will help overseas factories independently improve quality, differentiate product quality to compete with leading and emerging auto manufacturers, and improve quality to establish highest quality brand images.

Enhanced Quality Assessment | In 2007, HMC attained the highest quality scores through continuous effort to improve product quality. In the Vehicle Dependability Study conducted by J.D. Power, HMC received an award in Quality Satisfaction for three consecutive years. In 2007 Annual Car Reliability Survey released by ConsumerReports, we ranked 7th, six steps above from previous year, becoming one of the top auto brands with highest reliability in the United States. The 2008 Annual Auto Issue of ConsumerReports presented Elantra and Santa Fe as one of the 2008 Top Picks in the Annual Car Reliability Survey, and Elantra, Santa Fe, Sonata, Azera, and Tucson as Recom- mended Cars. Azera was selected as both one of the Most Overlooked Cars and Most Satisfying Car in Value in the Owner Satisfaction survey. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 37

i30, a model for the European market, and Veracruz, a luxury utility vehicle released to the U.S. market, have been well reviewed by major press and auto magazines in Europe and the U.S. Santa Fe received the perfect score (★★★★★) in the vehicle crash test conducted by the National Highway Traffic Safety Administration (NHTSA) and earned the 2007 Top Safety Pick award from the Insurance Institute for Highway Safety (IIHS) in the U.S. Strategic Vision, a San Diego-based research firm, selected Azera, Santa Fe, and Entourage as a highest quality vehicles in its Total Quality Study, and Azera and Santa Fe as the winners of the 2007 Total Value Index. Furthermore, i-10 won the Indian Car of the Year (iCOTY) 2008 award, which was the highest honor granted to a car model in India.

● Higher Brand Competitiveness Since HMC announced brand management policy and disclosed brand strategy and slogans in 2005, we have reinforced brand management both in quantity and quality terms. As part of our brand management, we published a new brand advertisement, "Think about it" in the U.S. market. In November HMC ranked among the 2007 Top 100 Global Brands and valued at 2007, HMC held the "Brand Day," where executives and employees learned how to apply brand strategy at 4.5 billion dollars (Business Week, August 2007) work, in order to enhance employees' awareness and understanding of the HMC brand. In 2008, we are planning to focus on improving brand image and power via expanding sales of high-end vehicles. We plan to promote Genesis, a full size sedan released in early 2008, and BK, a high-performance sports car to be released in the second half of 2008, as leading luxury models to upgrade our brand values. Moreover, we will strive to become one of the world class high-end automakers by providing high values to customers in terms of sales strategy, service, and customer management.

Enhanced Brand Competitiveness | Our brand value continuously improved. HMC ranked 92nd in 2005, 80th in 2006, and 76th in 2007, in the Fortune 500 Companies. In the Top 100 Global Brands conducted by Interbrand and BusinessWeek, we ranked 72nd, three steps above previous year, with brand value of 4.5 billion dollars. Among the auto brands, HMC ranked 8th, following Audi. Our ranking in brand value has been on the rise from 84th in 2005 and 75th in 2006 to 72nd in 2007, since we became the first Korean auto manufacturer to be one of the Top 100 Global Brands in 2005. AutoPacific, a marketing research and consultancy firm for the automobile industry, announced that HMC showed the largest opinion improvement with 32% enhancement from previous year. 38 Economy

34 Main Business Activities 38 Process Innovation Process Innovation

In September 2004, HyundaiㆍKia Motor Company started to introduce PI (Process Innova- tion). We planned to build new plants overseas and develop new cars to meet the sales and production targets. However, in 2004, we focused only on the domestic market, and produced and sold 1.67 million units per year. In order to make another leap forward as a global automaker, we had to shift to global production and sales system to improve its management both in quality and quantity terms. We also had to reinforce its capacity to minimize risks caused by large-scale investments and rapid business expansion, and support the global production and sales network. To this end, HMC selected 35 tasks to improve eight processes; Strategic Enterprise Management (SEM), Supply Chain Management (SCM), Customer Relationship Management (CRM), Plant Maintenance (PM), Quality Management (QM), Human Resources (HR), Standardization, and Construction Management (CM).

Strategic Enterprise Management(SEM)

Auto manufacturers have to make an enormous amount of investment and spend at least two to three years in developing new models and building new plants. Therefore, they are always exposed to many risks. HMC introduced strategic enterprise management (SEM) to support the corporate decision- making process and respond to business risks. HMC identified seven major steps for decision-making in the process of new model development (from research to mass production), and developed rules to make best decisions based on quantity, pricing, cost, investment, and profit and loss simulation results. To improve the reliability of investment cost calculation and assessment for building a new plant, we established standardized plant investment models (for an annual capacity of 150,000 and 300,000 units) that helps the decision making of the management.

Strategic Enterprise Management Simulation Model

Strategic alternative simulation Support for decision-making by sector Performance analysis after mass-production

Revenue Development of new cars • Sales quantity estimation • Quantity Target Actual • Price • Price estimation • Material cost estimation • Estimation of investment amount of product development Cost Quantity Price Quantity Price • Cost of materials Alternative Gap analysis simulation by factors Material Material Investment in factories cost cost Investment • Selection of best plan for plant • Product develop- Contribution Contribution investment Investment Investment ment margin margin • Plant investment HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 39

Supply Chain Management & Order to Delivery(SCM & OTD)

Supply Chain Management (SCM) and Order to Delivery (OTD) are designed to deliver vehicles to customers in a timely manner by shifting the current supplier-oriented sales and operation system to a market- and customer-oriented system, and closely liking sales requirements to the production area.

Order/Delivery management Dealership/ SCM Monitoring corporation/ Contract Order placed domestic SCM operation market Delivery information Forecast to promise delivery Global logistics Weekly information management demand planning Demand COP KPI management management 7-week production Demand demand SAS Monthly/weekly/ forecast daily capacity Mornitoring & Alert Early demand 5-month demand planning planning DM Advanced production planning Weekly demand APS planning Monthly planning review SCP Engine Engine and transmission integration 4-week and daily transmission MS APS planning Material system demand Monthly sales volume Weekly production Daily/sequence planning planning CKD/AS and option master planning Material requirement SCP MS Monthly and weekly Engine production planning planning

● Demand Management Innovation The demand management innovation increases the accuracy in demand forecast and makes a profound plan based on consultation between the Headquarters and overseas bases. The management system analyzes the local market conditions and forecasts sales figures for next five months. Subsequent- ly, we establish the demand strategy and specify the demand management levels to verify its demand planning.

● Order and Delivery Management In the past, we only notified the domestic customers of the delivery schedule in two weeks prior and often failed to provide a reliable delivery schedule to overseas dealerships. Recognizing the issue, HMC introduced Advanced Planning & Scheduling (APS II) to offer a delivery schedule based on production planning and inventory for the following two months. APS II can effectively manage the processes from order to delivery. If there is no inventory, the system first checks production planning to divert production capacity to the model that customers ordered. HMC can now swiftly respond to customer orders by the visibility of demand and supply based on sophisticated production planning.

● Monitoring System We established an integrated system to monitor sales, production, and inventory status, providing 80 types of information needed for the decision-making process. Currently, HMA (Hyundai Motor America) and Korean plants that produce commercial vehicles and transmissions have already introduced the integrated monitoring system. 40 Economy

34 Main Business Activities 38 Process Innovation

Customer Relationship Management(CRM)

Customer Relationship Management(CRM) aims to provide consistent customer services. Moreover, CRM is designed to attract new customers by helping a business efficiently allocate internal sales resources.

● integrated Customer Information Management System HMC unified the disparate customer information management criteria of the multiple sales and repair organizations. We selected 39 types of customer information as standard criteria. Based on the criteria, we developed an information collection and renewal system, taking into account features of each customer contact point. Relevant sales and repair departments share updated customer information to provide personalized service to each consumer.

● integrated Customer Information Management System We expanded our prospect collection channels to include repair service centers and various events from the existing customer center and website quotation service. If a prospect shows intention to purchase, the customer center contacts to ask purchasing period, preference of vehicle model, and offer consulting service from a car master. For example, if a prospect wants to buy a model within three months and receive consulting from a car master, a dealership in the region can directly contact the prospect. To other prospects, the customer center provides useful information to prevent from defect- ing to other automakers.

● Target Marketing HMC classified customers into 7 groups and 24 sub-groups according to age, gender, and preference of vehicle model. For example, despite our customers choose the same model of vehicle, we provide a differentiating service by customer group. Via this method, we can classify our target customers for the campaign initiatives such as launching a new model in order to increase the sales. In addition, HMC allowed multiple departments to share marketing event information to minimize customer complaints and conduct an analysis on the event results.

● Integrated Voice of Customer(VOC) Management We diversified the data collection channels and standardized VOC classification intosix criteria to respond the customers’ expectation. As VOC effectively delivers the issues to the relevant departments, customer complaints are swiftly addressed and we can increase customer satisfaction. We plan to establish a global customer management system, taking into account features of each market. The system will first implement into global management starting HMA (Hyundai Motor America) and HMI (Hyundai Motor India). Currently, HMC is developing a global customer needs analysis process and system to reflect global customers’ needs to product development. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 41

VOC collection channels VOC analysis VOC sharing/utilization VOC management system Customer Sales center public opinion on new cars, sales promotion

Branch/ car master VOC system Repair customer service improvement Repair/service technicians Quality quality improvement Classification criteria Auto prosumer 1. Sales 2. Repair Research 3. Quality new car develop- Test 4. Marketing ment, product improvement drive 5. After-market Loyalty Program 6. Suggestion/comment The headquarters institutional Extranet improvement

Plant Maintenance(PM)

Auto manufacturing is considered as an assembly business or a process industry. Therefore, it is important for an automaker to manage and maintain its plant facilities in best conditions from the mo- ment of procurement to disposal. We improved plant facilities to support the production lines based on effective plant maintenance, and maximize the value of assets. First of all, we established a collaboration system, where production and maintenance departments discuss new facility procurement. Secondly, HMC standardized the preventive inspection checklist and built a database to systematically manage preventive maintenance activities and their implementation results. HMC introduced PDAs and computerized drawings management system to help workers efficiently inspect facilities. This is designed to shift from the existing event-oriented maintenance to prevention-oriented maintenance to minimize facility failures and maintain plants in optimum conditions. Lastly, HMC increased efficiency of maintenance materials procurement and management. Based on the collaboration between maintenance and procurement (Value Advanced Automotive Trade Zone: VAATZ), HMC provided maintenance activities in a timely manner and efficiently managed maintenance materials. We first implemented VAATZ to the Asan Plant in January 2007 and then, Ulsan and Jeonju Plants later. Environmental Management

As an environment-friendly company adopting green management, HMC plans to contribute to a sustainable future by developing cars that meet the needs of the environment, people, and society.

Technological Prowess Shaping the Future of the Environment-friendly Car Market In November 2007, HMC became the first Korean automaker to acquire the certificate of preliminary assessment of the Recyclability Assessment Information System for Homologation from the EU. This was made possible thanks to HMC’s strenuous research on resource recycling and green management over the years. All processes of the car development at HMC are proven environmentally friendly. In addition, the Tucson FCEV won the first place in the fuel cell vehicle category of the 2007 Michelin Challenge Bibendum, proving HMC’s advanced fuel cell technology. page 50 44 Efforts to Minimize the Impact of the 58 Increased Recyclability 64 Clean Production Climate Change Resource Circulation Target Production Sites Fighting Against Climate Change Regional Responses Expansion of Recycling Technology Resource Circulation Development of Alternative Fuel Vehicles Life Cycle Assessment (LCA) Reduction of Pollutant Emissions Improving Vehicle Fuel Efficiency Minimizing Use of Harmful Substances Environmental Expenditures

55 Reduction of Gas Emissions Regional Responses Development of New Engines 44 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change Efforts to Minimize the Impact of 55 Reduction of Gas Emissions 58 Increased Recyclability the Climate Change 64 Clean Production

The 13th Conference of the Parties to the United Nations Framework Convention on Climate Change resulted in the adoption of the Bali Roadmap.* The aim was to draw up a roadmap that calls for advanced and developing nations to take strong measures against climate change. The roadmap will be employed in 2013, following the Kyoto Protocol, which ends in 2012. After a two-year discussion period, the UN is planning to finalize the “post-Kyoto regime,” which involves strengthening the greenhouse gas reduction target for 38 advanced nations after 2013 and assigning developing nations, such as Korea, China, and India, with mandatory reduction targets. This is substantially stronger than the Kyoto Protocol, under which 36 industrialized countries are reducing their collective emissions of greenhouse gases by 5.2% below the 1990 level between 2008 and 2012. Key advanced nations are re-establishing greenhouse gas reduction targets. The European Union (EU), which is taking a leading role in implementing international regulations on reducing greenhouse gas emissions in the automobile industry, is engaging in discussions on a bill

that would place a 130g/km limit on vehicle CO2 emissions starting in 2012. The legislation is

expected to be finalized by end of 2008. EU member nations are adopting a CO2 tax system,

which gives incentives to low CO2 emission vehicles and levies a tax against high CO2 emission vehicles. In December 2007, the US government approved a regulation that imposes a 35 mpg(miles-per-gallon) average for cars and light trucks by model year 2020. The regulation makes it mandatory for cars and light trucks to meet a fleet average of 31.6 miles per gallon by model year 2015. China has also been further strengthening automobile fuel efficiency regulations since 2008, and is implementing two-step regulations on fuel efficiency. We expect these movements will gain even more momentum and spread in 2009, when the international community will agree on a new goal to achieve substantial reductions in greenhouse gas emissions by 2020. As a global automobile manufacturer, we recognize the importance of alleviating impacts driven by climate change and is doing its best to reduce greenhouse gas emissions. The best way to reduce vehicle greenhouse gas emissions is to cut down the use of fossil fuel and to use alternative, low-carbon energy sources instead. Starting from the automobile design phase, we are performing research on car body design, application of new technologies, and production of lightweight vehicles so as to improve fuel efficiency. We are also increasing investments in research and development, with the goal of developing hybrid vehicles, which would cut fuel use by more than 50%, as well as alternative fuel vehicles that do not need fossil fuel. Unit conversion table 1gallon 3.785ℓ 1mile 1.609km 1mpg 2.36kpℓ(kilometer per liter)

* The Bali Roadmap adopted at the 13th United Nations Climate Change Conference in 2007 specifies the post-2012 framework, where developing countries as well as developed countries including the U.S. that has not ratified the Kyoto Protocol should be committed to reduce Green house Gas emissions. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 45

Regional Responses

● EU

The EU is moving forward with establishing mandatory regulations on vehicle CO2 emissions. In December 2007, the Commission of the European Communities tabled a proposal to the EU Council to cut

CO2 emissions to 130g/km on average by 2012, and to soften CO2 regulations according to the weight of a vehicle. The EU Council is currently engaging in discussions on this proposal. We expect this will cause a serious burden, considering the five to six years of prior time is needed for an auto maker to develop a new

vehicle. Considerable efforts made by HMC to cut down CO2 emissions in the EU region have resulted in an achievement of 161g/km in 2007, which is a reduction of 3g/km from 2006. We continuously strengthened

efforts to drive down CO2 emissions in 2008. We certainly ensure these strenuous efforts will lead to CO2

emission improvements in the near future. We are continuously reducing CO2 emissions by releasing the i30 diesel model that emits 119g/km and i10, the sequence model of Santro, that emits 114g/km in 2008.

We will make strenuous efforts towards achieving its new CO2 emission target in the EU region which is an annual fleet average of 130g/km for new vehicles.

Changes in average CO2 emissions of HMC cars sold in the EU region (unit: g/km)

210

200

190

180 -24g/km 170

160 -29% 161g/km(HMC) 150 KAMA actual

140 HMC actual HMC target 130 130g/km(New target) 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 46 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

Low CO2 emission models sold in the EU region (As of February 2008) (unit: g/km)

Model Engine CO2 Emissions i10 Diesel 1.1 MT * 114 Getz Diesel 1.5 MT 116 i10 Gasoline 1.1 MT 119 i30 Diesel 1.6 MT 119 Accent Diesel 1.5 MT 120 Atoz Gasoline 1.1 MT 129 Getz Gasoline 1.1 MT 130 Getz Gasoline 1.3 MT 134 Getz Gasoline 1.4 MT 136 i10 Gasoline 1.1 AT * 139 Matrix Diesel 1.5 MT 139 Atoz Gasoline 1.1 AT 140 *MT: Manual Transmission, AT: Automatic Transmission

Changes in combined fuel efficiency (US) ● USA YEAR Fuel Efficiency HMC has been continuously supplying vehicles with improved fuel efficiency to the US market. Model year 2004 27.7 mpg By engaging in efforts to improve the average fuel efficiency level while expanding its product lineup to Model year 2005 28.5 mpg include small- to medium-sized passenger vehicles and SUVs, We were able to improve the average fuel Model year 2006 28.9 mpg efficiency level from 28.9mpg in model year 2006 to 29.2mpg in model year 2007. We are also actively Model year 2007 29.2 mpg implementing fuel efficiency improvements so as to thoroughly prepare for the regulation that imposes a 35mpg average for cars and light trucks by model year 2020. Thanks to these efforts, HMC’s Accent and Elantra were among the top 30 environment-friendly vehicles chosen in the 2007 Automotive Environmen- The Accent and Elantra rated among top 30 environment-friendly tal Index (AEI), which combines the results of surveys by JD Power and Environmental Protection Agency models by JD Power and Associates in 2007 (EPA) on fuel efficiency, level of air pollution, and CO2 emissions.

● Korea Due to the increase of the oil barrel prices and the adoption of the Bali Roadmap, there are movements in Korea to strengthen vehicle fuel efficiency regulations. In fact, the Ministry of Knowledge Economy announced a new plan to adopt an average fuel efficiency scheme that is roughly 15% stronger than the current level. The regulated average fuel efficiency target for domestic vehicles with a 1,600cc or smaller engine has been strengthened from 12.4km/ℓ to 14.9km/ℓ, while the target for vehicles with an engine larger than a 1,600cc engine has been strengthened from 9.6km/ℓ to 11.5km/ℓ. The Korean

government is promoting the spread of low CO2 emission vehicles by giving incentives to fuel efficient automobiles. An example is the adoption of a five-grade fuel efficiency system that is applied to all domestic models, regardless of the vehicle class. This fuel efficiency system involves giving vehicles that have achieved a fuel efficiency level of at least 15km/ℓ with the top grade (Grade 1). The average fuel efficiency of HMC’s 2007 models with a 1,600cc or smaller engine was 14km/ℓ, and 11.6km/ℓ for the models with an engine larger than a 1,600cc, thereby contributing to improvements in HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 47

the average fuel efficiency of domestic passenger vehicles. In domestic market, we are developing and 2007 Status of response to fuel efficiency launching a large diesel-powered passenger vehicle with greenhouse gas reduction effects while supplying regulations in Korea the hybrid vehicles simultaneously to demonstrate our high level of concern for climate change. (unit: km/ℓ) Average fuel efficiency 15 14.0 of domestic passenger Fuel efficiency grade system 14 vehicles: 11.0km/ℓ 13 12.4 (unit: km/ℓ) 12 11.6 11 Category Scope of application 10 9.6 9 Grade 1 15.0 or higher Grade 2 14.9~12.8 Grade 3 12.7~10.6 1,600cc and under Over 1,600cc Grade 4 10.5~8.4 Regulated value HMC Grade 5 18.3 or lower

● Other Countries

Canada | The Canadian government announced a plan to introduce fuel efficiency regulations similar to the US after 2010 in order to further facilitate greenhouse gas emission reductions. In 2007, we improved the fuel efficiency of our passenger vehicles from 13.0km/ℓ to 14.9km/ℓ, but the increase in sales of high- class SUVs has caused the average fuel efficiency of the light trucks to slightly drop from 11.2km/ℓ to 10.8km/ℓ. We are increasing investments in research and development to further improve the average fuel efficiency of our vehicles, especially in the field of light trucks.

Yearly fuel efficiency achieved in Canada

(unit: km/ℓ) 15 14.7 14 13 13.2 13.0 12 11.6 11.6 11.6 11 11.2 10.5 10.8 10 9.4 9 8.8 9.2 8

2005 2006 2007 2005 2006 2007 Passenger cars Light Truck Regulated value HMC

China | All HMC vehicles sold in China satisfy the second step of fuel efficiency regulations that has been enforced from the beginning of 2008. However, due to the rapid increase of greenhouse gas emissions in China, we forecast the strengthened automobile fuel efficiency regulations. Thus, we will continuously develop and supply eco-friendly products with improved fuel efficiency to contribute on reduction of the greenhouse gas emissions. 48 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

Development of Alternative Fuel Vehicles

The development of alternative energy sources as well as the development and supply of alternative fuel vehicles is important in responding to the depletion of oil and reducing greenhouse gas emissions. The ultimate goal of developing new and renewable energy sources is developing and supplying non-polluting vehicles that have zero gas emissions. At present, hybrid electric vehicles, which use internal-combustion engines and electricity as their power source, are gaining attention as a powerful alternative. HMC is doing more than simply developing new technologies. We are concentrating to develop and supply practical and truly environment-friendly alternative fuel vehicles.

● Hybrid Electric Vehicle(HEV) The worldwide increase in oil use is leading to forecasts that the imbalance between supply and demand for oil will substantially grow around 2015. It is therefore necessary to develop alternative energy sources and ensure high efficiency in the transportation sector, which accounts for 30% of energy

use. Moreover, regulations on vehicle CO2 emissions are spreading all across the globe in order to mitigate climate change. Against this backdrop, the high-efficiency and environment-friendliness of HEVs is highly considered. An HEV combines the conventional power-train with an electric motor and a battery system to improve fuel efficiency and reduce gas emissions. In addition, an HEV can be fueled through the existing gas station infrastructure, predicting a bright future in terms of marketability.

Conceptual diagram of HEV and how it works Air

Gasoline/ Internal- diesel Trans- Fuel tank combustion Motor mission engine Electricity (Direct current) Braking energy Exhaust gas Battery

Starting Cruising Acceleration Deceleration At a Stop

During startup During driving During acceleration During deceleration At a Stop Engine startup is based on the Engine operates at the optimal Engine and motor simultaneously Supplied fuel is discontinued and At full stops, the engine is au- motor. During cold startup and state; the car runs; surplus driving operates the driving power to ac- the vehicle’s kinetic energy is tomatically turned off, resulting when battery is low, engine is power is stored in the battery celerate transformed into electric energy in improved fuel efficiency and used for startup. and stored in the battery lower emission

START GO STOP HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 49

● Development and Supply Since 2004, We have been participating in pilot operation programs carried out by government and public organizations as part of projects on supplying HEVs. We began test driving 50 Getz HEVs in 2004 and provided approximately 200 Accent HEVs to public organizations in the metropolitan area. In 2006, five major cities – Busan, Daegu, Gwangju, Ulsan, and Daejeon – received 220 HEVs. In 2007, we expanded the scope of recipients of HEVs to include other public organizations (i.e. kindergartens, schools, and welfare organizations). We have plans to supply roughly 1,010 vehicles for two years by the end of 2008. In 2009, we will commercialize the Elantra LPI (LPG Injection) HEV that will allow the reduction of car maintenance costs, thus increasing the supply of HEVs to general consumers. We are planning to release a hybrid version of a mid-sized model that features a hybrid system independently developed by HMC in North America in 2010 as well.

Elantra LPI HEV | In 2009, we are planning to produce and release the Elantra LPI HEV that will become the first to use an LPI engine in the world. For the successful development of the HEV, we are planning for the domestic production of expensive part, such as the motor, battery, and inverter. The aim is to minimize the price increase compared to existing vehicles, while ensuring environment-friendliness and practical use. We are faithfully implementing a plan to ensure high efficiency of the hybrid system and cost competitiveness through the development of domestic parts. The company is increasing investments into 1 Accent Hybrid (2008) research and development to commercialize plug-in hybrid vehicles after 2012 that allow for recharge of 2 LPI Hybrid Concept Car 3 LPI Hybrid Car 1.6 Engine the battery at homes and driving in electric drive mode in the neighborhood.

Steps for hybrid car development

Step 1 Step 2 Step 3 ( ~2004) (2005~2009) (2010~ ) 1

Acquire production technologies Establish a mass production system Diversify models [Pilot production] [Domestic development of parts] [Increased exports]

2012 Plug-in hybrid cars

2010 Development and increased exports 2 of a proprietary system 2009 Development of Korean parts and release of LPI hybrid cars on the market 2008 Provide Accent HEVs to general public organizations(710 units) 2007 Provide Accent HEVs to general public organizations(300 units)

2006 Contribution of the Accent HEVs to the public organization at 5 major cities(220 units)

2005 Contribution of the Accent HEVs to the public organization in the metropolitan area(200 units)

2004 Pilot driving of the Getz HEVs by the ministry of Environment(50 units)

2000 Pilot production of the Accent HEVs

1995 Preliminary development(Concept-I) 3 50 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

● Fuel Cell Electric Vehicle(FCEV) Once hydrogen replaces fossil fuels using new and renewable energy, people all across the

global will become free from air pollution and global warming resulting from CO2. A Fuel Cell Electric Vehicle (FCEV) is considered as the alternative non-polluting vehicle since it does not emit any hazardous substances. There are, however, various tasks that need to be addressed, such as high price tag, and the need to establish hydrogen infrastructures and use an excessive amount of energy in the hydrogen production process. As a globally-renowned auto manufacturer, we are very much concerned about the environment and fully recognizes the essential need for environment-friendly vehicles. The company is continuously making investments into developing technologies to overcome the various issues related to FCEVs.

● Technology Development We began developing fuel cell technologies in 1998, and is currently developing fuel cell systems that incorporate the unique philosophies of HMC. In order to improve the performance of fuel cell vehicles and increase marketability, we successfully verified the freeze-start capability of fuel cell 20 degrees below zero environments. We are focusing our efforts on technological development to resolve issues related to fuel cell technologies, such as durability and high production costs. Fuel cell-powered Tucson In 1999, HMC became the first to develop a fuel cell stack with a maximum output of 2kW and a power

Item Specification density of 0.2kW/ℓ In September 2005, it succeeded in the development of an 80kW stack with a power Fuel Cell Power 80 kW density of 1.0kW/ℓ that can be installed on a vehicle. We achieved great technological growth – 40 times Battery 20kW – LiPB greater stack output and 5 times higher power density. These technologies are being adopted for the Motor System 80kW hydrogen fuel cell-powered Tucson and fuel cell buses that have been used for the “FCEV monitoring

H2 Tank 3.6 kg H2 @ 350 bar project” since 2006. Driving Range 384 km With proprietary technologies of fuel cell systems, we ramped up development of more than 90% of local

Acceleration(0 ~100kph) 16.2 sec parts. The hydrogen fuel cell-powered Tucson is equipped with 20kW-LiPB auxiliary power, a 40kW/80kW Max. Speed 141 KPH driving motor system, and 35 MPa (Mega Pascal) hydrogen storage fuel tanks. It can accelerate from zero to 100km/h in 16.2 seconds, and reach a maximum speed of 141km/h. In November 2006, we developed a hydrogen storage fuel tank with a capacity of 70MPa so that more fuel can be stored, thereby extending the cruising range. In May 2007, we developed a 100kW stack that achieved a 25% and 20% improvement in the maximum output and power density, offering the same performance as internal-combustion engine vehicles. The stack was installed on the Tucson and testing is held on actual streets. The Tucson equipped with the 100kW stack is expected to accelerate from zero to 100km/h in 12 to 13 second range and reach a maximum speed of at least 160km/h.

Fuel cell-powered bus HMC Fuel Cell Electric Vehicle | The excellent features offered by the Tucson have resulted in winning

Item Specification first place in fuel efficiency in the environment-friendly vehicle category of the <2005 Monte Carlo Rally>, Fuel Cell Power 160 kW and in the fuel cell vehicle category of the <2007 Michelin Challenge Bibendum>. The Michelin Challenge Super Capacitor MAX. 240 kW Bibendum is a contest that was launched in 1998 with the aim of evaluating environment-friendly technolo- Motor System 240kW gies and cars that would lead the future automobile market and promoting such technologies and cars by

H2 Tank 40kg H2 @ 350 bar relevant companies. A total of ten fuel cell vehicles from globally-renowned auto makers entered into the Driving Range 386 km contest. The Tucson was the only vehicle to receive an A in all categories - noise, exhaust, fuel efficiency, and

Acceleration(0~50kph) 14.2 sec CO2 emissions. The outstanding fuel cell technologies of HMC were thus proven. Max. Speed 74 KPH HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 51

1 2007 Michelin Challenge Bibendum Awards History of fuel cell stack development by HMC 2 Fuel cell-powered Tucson Stack output density(W/liter)

1400 ● 100kW (2010, plan)

● 1200 100kW (2007.5) ● ● 1000 35kW(2003.10) 80kW(2005.9)

800 System operation in air pressure ● 600 ● 35kW(2003.8) 25kW(2002.10) Minimization of electric power consumed 1 by driving equipment 400 ● 10kW(2000.10) Achievement of the highest system efficiency 200 ● in the industry 2kW(1999.10) 0 10 20 30 40 50 60 70 80 90 100 110 Stack output(kW)

The i-Blue, which was unveiled at the <2007 Frankfurt International Motor Show>, features a future image of fuel cell vehicles that we are moving towards. An increase in the power density will result in a reduction in 2 the size of the 100kW stack by half. It will be installed on the vehicle’s underfloor resulting in an equal distribution of the car’s weight, for a dynamic driving experience and steering stability. The driver will be able to start i-Blue(2007 Frankfurt International Motor Show) the engine even at 30 degrees below zero. By improving system efficiency to 60 % and employing a hydrogen

Item Specification storage tank with 700 bar, the cruising range of the vehicle will be extended to 600km. Mileage 600 km [375 miles]

Maximum speed 170 kph[106 mph] ● Others Fuel cell 100 kW [134 hp] Super Capacitor 450V/100kW/13 Wh/L Biofuel Vehicles Driving motor FR In-line 100 kW ▪ Ethanol Vehicles | Bioethanol mostly derived from sugar canes in Brazil. There has recently been an in- RR In-whell 20 kW x 2 crease in the use of bioethanol derived from corn in the US. As a measure against the high oil prices and global Fuel Compressed hydrogen warming, nations are implementing policies on Flexible Fuel Vehicles (FFVs) which can use ethanol and gasoline [700 bar] mixture, and E85 vehicles, which use a blend of 85% denatured ethanol and 15% gasoline. However, bioethanol fuel has its limitations in reducing fuel costs since it is produced by using food resources. As a countermeasure, the US is taking a lead in the development of bioethanol fuel that uses cellulose. To this end, we expect the supply will increase after 2012. In response, we are engaging in research and development of a proprietary vehicle that runs on bioethanol fuel. ▪ Biodiesel Vehicle | Bio-diesel made from rapeseed, palm, and soybean replaces diesel. The EU, where diesel vehicles are prevalent, is promoting the use of BD5 (5% biodiesel blend) through fuel quality standardization. All diesel models of HMC can use diesel fuel with a 5% biodiesel blend. In preparation for a substantial increase in the supply of environment-friendly biodiesel, we are developing diesel engine technologies that allow the use of biofuel blend of 20% to 30%. When developing biodiesel vehicles, HMC will sufficiently consider their positive and negative impacts on society and cautiously make decisions based on the profound business judgment. 52 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

Compressed Natural Gas (CNG) Bus

CNG has the effect of reducing gas and CO2 emissions, but the further infrastructures establishment is needed for the use. This is why CNG has been mostly used for express and city buses that run in a specific area. Since July 2004, we have been supplying CNG buses in major regional areas across the nation as well as in Seoul. The CNG buses by HMC have been appreciated for excellence in quality and recognized for technological competence. Consequently, our share of the domestic CNG bus market reached 68.4% in 2005. Starting with the export of CNG buses to Peru in 2006, HMC has been exporting CNG buses to Latin America and Southeast Asia, thereby contributing to the improvement of air quality in areas where

1 such vehicles are in operation. We stabilized CNG bus production in 2007 and has been smoothly supplying a great number of CNG buses. The company is making strenuous efforts for the development of more eco-friendly CNG buses.

Improving Vehicle Fuel Efficiency

Reducing greenhouse gas emissions and contributing to the mitigation of climate change by making improvements to vehicle fuel efficiency is an important task. We have made considerable achievements in the development of new engines and new automatic transmissions as well as the application of 2 lightweight materials to vehicles, aiming to improve vehicle fuel efficiency. We are expanding investments into research and development in this field.

● Improvement of Engine We made a roughly 10% improvement in maximum output and an approximately 12% (13.8km/ℓ) improvement in fuel efficiency to the new Elantra HD, compared to the previous model. This has been made possible by the adoption of a wide range of environment-friendly technologies and speci- fications, including a new lightweight gamma-1.6VVT engine featuring an aluminum cylinder block, a new 3 small-sized transmission, a Motor Driven Power Steering (MDPS) system, and silica tires. 1 1.6 VVT engine The new Santa Fe has achieved an improvement in fuel efficiency by 9.2% compared to the previous 2 2.5 VGT A engine 3 Next-generation small auto transmission model. This was enabled by the employment of a second generation 2.2 liter D engine, high-performance Variable Geometry Turbocharger (VGT) technology, and the second generation common rail system with high injection pressures of 1,600 bar. High pressure fuel is injected into air, which is optimally controlled by the VGT through the common rail system, providing the best conditions for combustion. The Grand Starex gained a 6% fuel efficiency enhancement over its predecessor while improving its maximum output by 20%. To this end, we applied the 2.5 liter VGT A engine, second generation common rail system with high pressure injection of 1,600 bar, and 5-speed automatic transmission. Also, drag coef- ficient (Cd) improvements were made.

● Improvements to the Transmission A well-designed transmission can improve fuel efficiency by more efficiently transferring the power of the engine, thereby contributing to the mitigation of climate change. Improving the efficiency of the automatic transmission has become an extremely important task for improving fuel efficiency and reduc-

ing CO2 emissions, in tandem with the increased use of automatic transmissions. Realizing miniaturization HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 53

and applying multi-speed technologies are of prime importance to improving the efficiency of automatic transmissions. Taking this into due consideration, We have been engaging in extensive research and development. We succeeded in the independent development of the next-generation downsized automatic transmission, which can be applied to compact vehicles, the 5-speed automatic transmission for use in mid- and full size vehicles, and the lightweight automatic transmission that can be used for light vehicles. After a development period of five years, we successfully developed the 4-speed automatic transmission for use in light vehicles in 2007, thereby considerably contributing to fuel efficiency improvements.

● Lightweighting Reducing the weight of the vehicle is an important factor in improving fuel efficiency. In general,

a reduction of a vehicle’s weight by 100kg leads to a roughly 8g/km improvement in CO2 emissions for every 1km driving. We are continuing research for the development of space frame type vehicle bodies, high-strength steel plates with reduced weight, and environment-friendly compressors. We developed and applied a high strength, light weight steel plate with reduced thickness. The strength of the new plate is 1,180Mpa (strengthen that can withstand a weight of up to 120kg per 1mm2), twice as much from the previous plates, whose strength was merely around 590Mpa (up to 60kg per 1mm2). The new plate also improved in terms of thickness by about 33%. By applying the new high strength, light

weight steel plate to all models, HMC will enhance vehicle safety and contribute to a reduction in CO2 emissions and fuel costs through lighter weight.

Growing into a Global Environment-friendly Company through The Development and Sales of Hybrid Vehicles

Ki-sang Lee (Director, HMC Hybrid Design Team)

Although the development of alternative fuel is urgently needed in confronting environmental issues such as climate changes and depletion of recourses, development of fuel efficient hybrid vehicles is underlined since there are currently no straight answers to the issues. We plan to launch Elantra LPI Hybrid in the domestic market in 2009 by combining LPG fuel and electric motor. Moreover, we aim to introduce mid-sized gasoline hybrid car in 2010 in North American market. We are strengthening research and development in preparation for deployment of plug-in hybrid vehicles in 2010, which can be charged with the electricity at home and travel a short distance. Plug-in Electric Vehicle is a new concept car whose batter can be charged with the external power while it requires seven to twelve times more battery power than before. For a battery technology is the key factor as well as a problem in implementing environment-friendly vehicles technology, we plan to gear up to develop environment related technology and bring up suppliers. HMC is on the verge of strengthening the image of clean “BLUE” in order to develop as an eco-friendly company and laying a basis for becoming a top automobile company. We will grow as a global automobile company by promoting development and sales of products according to domestic and foreign environmental standards and environment preservation activities. 54 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

Establishment of a System to Manage Information on Global Environmental Regulations and Relevant Risks

HMC is making efforts to minimize management risks that are related to the environment by building and operating an information system on environmental issues and regulations for the integrated management of global environmental regulations that are becoming stronger and diverse across the globe.

A greater number of countries are prohibiting the use of harmful chemicals that is leading to impact on environmental issues such as climate change, depletion of resources, and water shortage. Advanced nations, such as the US and EU, are continuously strengthening environmental regulations to protect the global environment and the health of the people and to preserve the ecosystem. This trend is spreading all over the world. In addition, environmental regulations are becoming non-tariff trade bar- riers against the backdrop of free trade gaining momentum in the global market. As such, environmental regulations have become a big risk to export-oriented companies.

We launched the Global Environmental Regulation Information System (g-ERI) in December 2007 in order to improve each sector’s structure of responding to environmental regulations and to manage, in an integrated manner, all sectors, including the research institute, sales, production, and service centers. The overseas bases of HMC that are spread throughout the world send information on environmental regulations and trends in different nations through the g-ERI in a timely fashion, allowing to share the information with the research institute, production, sales, and service centers. The implementation of a scheme enables early measures. We expect this system will contribute to minimizing potential risks from the strengthening and diversifying global environmental regulations.

HMC has drawn up plans to expand the role of the g-ERI so that it can be used as a communication system for a wide variety of environment-related matters such as government policies, market changes, and consumer needs in various nations. By doing so, we will actively incorporate the steadily increasing environmental demands of stakeholders into corporate management.

1 『Global Environmental Regulations』 Brochure 2 http://g-eri.hmc.co.kr/ERMS 1 2 Environmental Management 55

44 Efforts to Minimize the Impact of the Climate Change Reduction of Gas Emissions 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

Reducing tailpipe emissions in urban areas, where there is a concentrated population, is an important task that needs to be tackled for the improvement of air quality. We strictly manages its vehicles’ tailpipe emissions, such as NOx and PM, around the world to conform to the relevant regional regulations, thereby improving air quality in urban areas. We are increasing investments for the development of new technologies to create vehicles with ultimately zero gas emissions.

Regional Responses

● EU Emission report of the Getz and Sonata Following the adoption of the Euro IV standard in 2005, the Euro V standard is expected to be against Euro regulations enforced in the EU in September 2009, which will call for an 80% stricter reduction of Particulate Matter (unit: g/km) (PM) emissions and 30% reduction of NOx emissions from diesel vehicles in comparison to the Euro IV PM standard. The EU is also engaging in discussions on enforcing Euro VI regulations which will mandate 0.025 Euro 4 an additional 60% reduction in NOx from diesel vehicles compared to Euro V standards. HMC has been

0.020 Getz 1.5 diesel selling vehicles that are in compliance with the Euro IV requirements since 2006. In preparation for the strengthening of regulations on PM emissions from diesel vehicles to 0.005mg/km, we plan to equip our 0.015 diesel models with Diesel Particulate Filters (DPFs). In case of the recently released i30 diesel model, the

0.010 NOx emissions level is 0.203g/km, which is roughly 80% of the regulated value. The PM emissions level is 0.017g/km, which is around 70% of the regulated value. Some of the models currently sold satisfy Euro 0.005 Euro 5 Sonata diesel, V standards in terms of gas emissions performance. The Sonata 2.0 diesel model satisfies the PM stan- DPF applied dards (0.005g/km) of Euro V. The Getz 1.5 diesel model, among other models, satisfies the NOx standards 0.05 0.10 0.15 0.20 0.25 0.30 NOx (0.18g/km) of Euro V.

● USA The US can be divided into states in which the federal Tier-2 regulations or California’s LEV II regulations are in effect. California’s LEV II and Zero Emission Vehicle (ZEV) regulations are deemed to be the strictest gas emission regulations in the world, and thus, the development of environment- friendly vehicles that comply with these regulations is considered as a very important challenge for auto manufacturers. The achievement of former ZEV regulations was next to impossible with current automobile technologies. In March 2008, California partially softened ZEV regulations by add- ing the improved Advanced Technology Partial ZEV (AT-PZEV) that allows for the preferential application of plug-in hybrid vehicles in exchange for a reduction in the mandatory ratio of pure ZEV vehicles. Currently, all HMC vehicles sold in the US are gasoline-powered vehicles that satisfy the regional regulations. We developed and is selling Elantra 2.0 and Sonata 2.4 that boast gas emissions perfor- mances equal to that of Super Ultra Low Emission Vehicles (SULEVs) in the US market. We intend to produce a variety of vehicles with SULEV class emission performance to improve air quality and boost consumer satisfaction. Moreover, we are making efforts to develop and mass-produce future-oriented environment-friendly technologies, such as hybrid vehicles, plug-in hybrid vehicles, and fuel cell vehicles. 56 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

California’s LEV II and Zero Emission Vehicle (ZEV) regulations

Category Model year Model year Model year Model year ’06 - ’08 ’09 - ’12 ’12 - ’14 ’15 - ’17 Mandatory ratio of ZEV 10% 11% 12% 14% Previous Previous Previous After revision Previous After revision Pure ZEV - 2.5% 3% 0.9~3.0% 4% 3~6.0% Improved AT-ZEV - - - 0~2.1% - 0~3.0% vehicle types

Composition of AT-ZEV 4% 2.5% 3% 3% 4% 4% PZEV 6% 6% 6% 6% 6% 6%

● Korea Most passenger vehicles in the Korean automobile market run on gasoline, but most SUVs have a diesel engine. In consideration of this fact, gasoline vehicles are governed by regulation as strict as Low Emission Vehicle II (LEV II), which is enforced in California in the US for low emission vehicles, while Number of HMC models in each diesel vehicles are emission-controlled by the Euro IV standards. All our vehicles in the market comply with gas emissions grade category in 2007 the above mentioned regulations. In fact, most products achieved much more than what is regulated. (unit: number of vehicles) In 2007, the Ministry of Environment conducted evaluations on tailpipe emissions to classify vehicles. Ten Fuel Grade 1 Grade 2 Grade 3 Grades 4&5 gasoline vehicles, five diesel vehicles, and two LPG vehicles of HMC received grade 1 certification, which Gasoline 10 9 6 - is presented when gas emissions are 45% or less than regulated levels. Nine gasoline and five diesel cars Diesel 5 5 - - achieved grade 2 certification, and six gasoline vehicles received grade 3 certification. We are making LPG 2 - - - efforts to make vehicles more environment-friendly by achieving gas emission levels that are less than regulated levels. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 57

Development of New Engines

HMC is strengthening engine technologies aimed at reducing gas emissions. The diesel engines of passenger cars have become equipped with the Catalyzed Particulate Filter (CPF). These engines feature an exhaust gas purifying level of over 90%. The filter helps cut exhaust emissions dramatically. In the case of the small and middle size I-4 gamma engine, which has a variety of environment-friendly qualities, the Warm-up Catalytic Converter + Under-floor Catalytic Converter (WCC+UCC) is placed at the back of the vehicle to shorten the catalyst activation time, thereby improving catalyst purifying efficiency. 1 We reduced gas emissions and improved fuel efficiency by employing the offset crankshaft to reduce fric- tion of the piston and aluminum cylinder blocks to bring down the weight of the engine. To improve gas emissions from mid- to large-sized commercial vehicles, we developed three commercial diesel engines. The 3.9L F engine and 5.9L G engine employ the third generation common rail system with high injection pressures of 1,800 bar, thereby satisfying the gas emission regulations of the Euro-IV and achieving high performance and low fuel consumption. The 10L H engine applies a 2,500 bar high-pressure unit injector for the variable control of the opening and injection pressure to realize optimal combustion conditions. In addition, the multiple injection function has resulted in an improvement in noise and reduc- 2 tion in gas emissions. To cut down the level of particulate matters, HMC applies the Particulate Matters Catalyst (PMC) after-treatment device, which lasts as long as the engine and removes the need for recirculation and maintenance. In terms of NOx, the electronic Exhaust Gas Recirculation (EGR) cooler is applied to allow for purification based on a low combustion temperature. Moving forward, we will continue to develop new engines that are more environment-friendly to satisfy the gas emission regulations in North America and Europe.

3 1 3.9L F engine 2 5.9L G engine 3 10L H engine 58 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change Increased Recyclability 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

Automobile is the basic essential of human life. An important goal of HMC is to prevent environmental pollution by recycling resources that are used for manufacturing of automobiles and enhancing the value of end-of-life vehicles. We are prohibiting the use of hazardous substances for the new vehicle development phase to prepare the recycling process of end-of-life automobiles. To verify the recyclability of all models, we are operating the Recyclability Assessment Information System for Homologation (RAIS-H). The company is thus responding to recycling laws and regulations that are being strengthened all across the globe. Moreover, HMC is recycling scrap materials such as plastic parts and waste PET bottles that are generated during the automobile parts manufacturing process. HMC is making efforts to boost research and development through the Automobile Recycling Center in order to increase recyclability.

Resource Circulation Target

Based on recognition that automobiles are precious resources, HMC is making strenuous efforts to improve the recyclability of end-of-life vehicles. The mid-term goal of HMC is the early achievement of the recycling and energy recovery rate of 95% by 2015 targeted by the EU and Asia. To this end, we are working on Design for Recycling(DfR) and making improvements to end-of-life vehicle dismantling and handling technologies, and functional part manufacturing technologies along with the development of polymer material recycling technologies. Through the partnership with the end-of-life vehicles management companies, we are jointly developing vehicle dismantling technologies and transferring the technologies to relevant industries. We are also making efforts to realize resource circulation through the expansion of use of recycled materials.

Efforts to achieve the resource circulation target

Resource circulation

95% recyclability/recoverability rate

Design for Development Development Expanded use Recycling rate Recycling of dismantling of recycling of recycled monitoring (DfR) technology technology materials HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 59

Expansion of Recycling Technology

● Eco-Design We are carrying out digital design verifications for all models in the design phase to reduce the development period by bringing down the number of design changes that are made after the design phase and cut down relevant costs. At the same time, improvements on disassembly were made through digital recyclability verifications in the design phase, thereby increasing the percentage of end-of-life automobile parts being reused, recycled, and remanufactured. Dismantling of parts needs to be easy in order to boost recyclability. By using 3D diagrams in the design phase, virtual vehicles are created to carry out disassembly simulations, thereby assessing and improving disassembly. HMC is currently applying Design for Environment (DfE) for all models.

● Calculation of the Recyclability Rate for Newly Developed Vehicles In order to respond to EU’s Certificate of Compliance and the recycling laws and regulations of nations around the world, we are calculating and managing the recyclability rate before the release of all new vehicles. For this purpose, we use a web-based internal system, the Recyclability Assessment Information System for Homologation (RAIS-H). RAIS-H is a program used to determine the recyclability and recoverability rate. Data is collected from relevant sectors, such as the design and certification sectors as well as partner companies, to determine the recyclability rate, which is used to respond to recycling regulations in various nations. Information on the recyclability rate is used as basic guidelines for environment-friendly design. In 2007, we used RAIS-H to complete assessments on the Grand Starex, i30, and Genesis. The results indicate that the vehicles satisfy the recyclability rate of 85% and recoverability rate of 95%, which are stipulated in end-of-life vehicle domestic and foreign regulations, including Europe.

● Development and Employment of a Wide Array of Recycling Technologies

To reduce CO2 emissions, achieve a recyclability rate of at least 95%, and meet the 2015 energy recovery target stipulated in end-of-life vehicle recycling domestic and foreign regulations, we are developing various recycling technologies by choosing parts targeted for disassembly in consideration of environment-friendliness, cost, and work efficiency. For the recycling of rubber material scrap, HMC independently developed a technology that transforms materials into powder in high temperatures. In 2007, we completed the development of base technologies for the recycling of rubber material scrap, such as pulverization using shear force at high temperatures, optimization of desulphurization conditions, recycled rubber powder manufacturing and production-related mix design, and manufacturing of pilot products. In 2008, we are working on developing technologies for mass production and commercialization. By employing the developed technologies, rubber material scrap will be used for the production of the overslam bumpers and gaskets of automobiles starting from early 2009. We have set a goal to reduce ELV (End of Life Vehicle) waste to around 5% by 2015. The company developed a technology that extracts polyurethane and textiles from Automobile Shredder Residue (ASR) that result from the ELV shredding process to absorbed sound materials for automobiles. Other efforts include the development of technology that use components such as plastic, rubber, and inorganic materials as 60 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

fuel for cement production. In addition, strenuous efforts are being made to minimize environmental load and enhance the recyclability rate by developing technology that destroys, based on an environment-friendly approach, and stabilizes automobile coolants, which have a considerable impact on global warming. We aim to contribute to environment preservation by developing high value-added recycling technologies for PET bottles. To this end, we have been conducting research on “Recompounding" technology since 2007 that allows for free control of the intensity and shape after a crushing and washing process. After material development in 2008, we will use the recycled materials for window winding motor "Housing" upon completion of a pilot product production and evaluation process. It is anticipated that the scope of application will be expanded to include exterior parts, such as the "Step Assist" and "Fender" in 2009.

● Vehicle Recycling Center The Vehicle Recycling Center is a 4,950m2 building on a site spanning 10,890m2. This facility can process 4,200 vehicles each year. Through a monitoring system that employs cutting-edge ubiquitous technologies, a series of processes related to end-of-life vehicles can be checked in real time, including the recycling of end-of-life vehicles and the waste treatment volume. Through the operation of the Vehicle Recycling Center, we are recovering more than 90% of liquids and gases and have improved the ELV recycling rate to at least 85%. Using the technology gained through the operation of the recycling center, we plan to study recycling and environment-friendly treatment methods from the early design stage, and will apply the results to the design stages of new vehicles. Also, HMC will form a partnership with the domestic car-scrapping industry and provide them with operational technology and know-how, and contribute to establishing a high standard for end-of-life vehicle management.

● Acquisition of EU’s Certificate of Compliance In November 2007, HMC became the first domestic automobile company to acquire EU’s Cer- tificate of Compliance. This certificate was presented by RDW (the Center for Vehicle Technology and Information of the Netherlands), an officially recognized certification organization by the EU, in recognition for the prohibition of use of heavy metals and recycling strategies of all domestic plants as well as the Indian and Turkish plants of HMC, and the process for calculating the recyclability rate. The results of many years of research on environmental management and resource circulation thus gained objectivity. We have 1 | 5 Certification for domestic plants 2 | 5 Certification for the India Plant drawn up plans to receive the certificate for the Czech plant, which will commence operations in 2009. The 3 | 5 Certification for the Turkey Plant acquisition of the Certificate of Compliance has enabled the application for the certificate for each model. 4 | 5 RAIS-H Certification for i30

1 2 3 4 5 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 61

In April 2008, i30 became the first in Korea to acquire the Certificate of Compliance from VCA (The United Kingdom Vehicle Approval Authority), an officially recognized certification organization by the EU. i30 was officially recognized for its eco-friendly system in all processes of vehicle development. The recyclability rate satisfies legal requirements, by using recyclable materials and the application of a structure that allows for easy disassembly and recycling. We are moving forward with receiving certifications for the i10, New Elantra, and Grand Starex. Plans have been devised to acquire certifications for all new models that are being developed.

Life Cycle Assessment (LCA)

We conduct Life Cycle Assessment (LCA), which is a quantitative assessment on environmen- Global warming Previous model tal impacts throughout the entire life cycle of acquisition of raw materials, production, use, and disposal. 17.5% Genesis 100 HMC compares the newly developed vehicles through LCA process with the existing vehicles in the same class and use the results as data for developing environment-friendly vehicles. 90

14.8% 80 18.6% ● Genesis Resource Photochemical depletion 70 smog An assessment of the Genesis result a reduction in gas emissions and improvement in fuel efficiency through engine performance improvements, which accounts for around 75% to 80% of the entire life cycle of a vehicle in comparison to previous models. Overall environmental performance has been improved in terms of global warming (17.5%), acidification (13.4%), eutrophication (13.5%), photochemical smog (18.6%), and resource depletion (14.8%). Assessment results also indicated that environmental 13.5% 13.4% Eutrophication Acidification load substance (CO2) emissions were reduced by as much as 17.7%compared to its predecessors. Moving forward, we will carry out environmental assessments on all newly developed vehicles and use the results as a means for communication with stakeholders, including consumers, on environmental matters. Eco-efficiency

(unit: %) ● Eco-efficiency* 130 For sustainable development, we adopted eco-efficiency as the environmental performance 120 129.2 index. Eco-efficiency is an assessment technique that was mainly developed in Europe and Japan. System 110 119.7 involves comprehensively assessing sustainability in consideration of the environmental and financial per- 100 103.5 90 100 formance of a company or product.

80 A reduction in environmental burden meanwhile an increase in economic value needs to be achieved to increase eco-efficiency. Activities performed to enhance eco-efficiency are closely related to the sustain- 2004 2005 2006 2007 ability of a company and product. We developed indexes on environmental load and economic values of the company, plants, and vehicles, and is using the indexes to perform eco-efficiency assessments. The eco-efficiency assessment indexes for the company include the sales volume (economic value), as well as

total CO2 emissions and resource usage (environmental burden). The eco-efficiency level of HMC improved by 19.7% and 29.2%, respectively, in 2006 and 2007 compared to the year 2004. These results demon-

strate that HMC is steadily improving its efficiency in terms of CO2 emissions and resource usage against the sales volume. This translates into improvements in the company’s sustainability. We have drawn up * Economic Value Eco-efficiency = plans to build an internal system that systematically manages eco-efficiency indexes on the company, Environmental Burden plants, and vehicles so that it can be used as an essential tool for sustainable development, which involves pursuing a high level of environmental and financial performance. 62 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

Minimizing Use of Harmful Substances Roadmap to expand global standardization of the four heavy metals An important task in corporate environmental management is maximizing the recyclability of ELV (End of Life Vehicle) and strictly restricting the use of harmful substances from the vehicle design phase, thereby minimizing their impact on the environment and mankind. Based on collaboration with part- 2009.12 3rd Step Plans to apply to entire vehicles and parts ners in the development and production phase, we are placing restrictions so that harmful substances are produced at BHMC, HMI, HMMA not used in all vehicle parts. The company is also strengthening the development of alternative materials.

Global Standardization of the Prohibition of Use of the Four Heavy Metals 2008.12 ● 2nd Step Plans to apply to entire vehicles and parts With the goal of satisfying EU’s end-of-life vehicle regulations, improving the environmental produced at HAOS, HMMC performance of vehicles, and complying with regulations in the EU market, HMC developed substitutes for four heavy metals (lead, mercury, cadmium, and hexavalent chromium) included in parts and raw materials 2007.12 and have been using the substitutes since 2002. Moreover, HMC does not use the four heavy metals in all Applied to entire vehicles and parts produced in domestic plants materials, parts, and vehicles we globally sell. We established global standard guidelines of the four heavy 1st Step 2007.12 metals in November 2006 and implemented according to a three-phased roadmap. Since early 2008, the Applied to entire vehicles and parts produced company has been applying substitutes for the lead content of aluminum for machining purposes and lead in domestic plants, HMI, HAOS, targeting EU market(deferred items: 2006.12)* content in bearing shells and bushes. In preparation for the enforcement of domestic ELV laws in July 2008, we are completely prohibiting the use of the four heavy metals in all new domestic models (excluding deferment and exceptional clauses in relevant laws and regulations). We are implementing plans to completely prohibit the use of the four heavy metals in the global market by 2010.

Global Standard Guidelines of the Four Heavy Metals

In accordance with the environmental operation policy of HMC, no lead, mercury, hexavalent chromium, or cadmium will be used in HMC automobiles or parts sold around the world, and we will conform to this voluntarily. 1. All employees will fulfill their responsibilities to ensure that none of the four heavy metals are used in any part of the process of our operations in development, production, sales, use, and disassembly. 2. All domestic and foreign partners doing business with HMC will ensure that none of the four heavy metals are included in any of the materials or parts delivered to HMC. 3. HMC and all partners – domestic and foreign – will reinforce the response process to regulation regarding the four heavy metals and strengthen environmental training of our employees. 4. HMC and all partners – domestic and foreign – will do their best to cooperate with one another in promoting these global standard guidelines of the four heavy metals. * The EU regulation on scrapped vehicle that has been executed since November 15, 2006 July 2003, exceptionally permitted 1~5 years of postponement period towards the technically irreplaceable parts. On December 2006, all Dong-jin Kim, Vice Chairman & CEO models and parts of HMC export to Europe were prepared to meet the regulation except for the lead content in bearing shells and bushes. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 63

● Establishment of a Hazardous Chemical Material Management System Annually generated volume of IMDS data Since 2004, we have been continuously monitoring and systematically managing all hazardous (unit: cases) 100,830 materials for auto parts through the International Material Data System (IMDS). Currently IMDS is only implemented at domestic and some overseas plants. However, plans have been established to implement 63,830 the system at all overseas plants, and include materials that are managed offline, allowing for integrated

32,498 management of hazardous chemical materials based on a system. HMC is also developing the e-Chemical Management System (e-CMS), which is scheduled to be completed in June 2008, to actively use data on chemical materials in automobile parts that is accumulated in 32,269 31,332 37,000 229 IMDS. We expect that the development of this system will lead to the systematic management of chemi- 229 2004 2005 2006 2007 cal materials and weight of automobile parts, continuous reduction of environmentally harmful materials, ● Cumulative □ Annual and enhancement of environment-friendliness. In addition, we are providing training on IMDS and new environmental laws and regulations by region to all partner companies to manage harmful materials based on joint efforts. e-CMS construction and operation

Management of the four heavy materials prohibited from Recyclability rate, use Interface with Provision of IMDS data resulting data Sustainable Development of CO2 Reduction e-CMS Technology in Response to Environment Chemical Monitoring of material statistics/ environmental Regulations and Customer’s Need determine the laws and level of use regulations Search for chemical materials/build a database Degen (Deputy General Manager, European Technology Center Legislation Assessment Team)

EU is continuously strengthening the environmental regulations. According the ‘European Consumer Survey’, eco-friendly product is one of the main factors that affect customer’s decision-making. For the sustainable growth of HMC in European market, we will have to respond actively in both environmental regulations and the customer’s needs of environmental products. European technology research center has to play a significant role in establishment of European environmental strategy. As a director of environ-

ment department, reduction of CO2 emissions is the key issue due to the increase of oil barrel prices and

the impact of climate change. Through discussion, EU is planning to reduce averaged CO2 emissions from 130g/km in 2013 to 95g/km in 2020. Advanced technologies such as light weighting, Hybrid and efficient air condition will be used to accomplish the new objective. Moreover, HMC will have to quickly acquire information from g-ERI and respond to the implementation of Euro 5 of Euro 6 and chemicals substance regulation (REACH) 64 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change Clean Production 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

An important task that needs to be addressed by automobile companies is to minimize environmental pollutant emissions and optimize the use of resources during the automobile manufacturing process. The use of raw materials, subsidiary materials, energy, water resources, among others, in the process of manufacturing vehicles results in byproducts such as waste heat, wastewater, gas, waste, and stench. It is thus essential to establish a clean production system to effectively manage byproducts. The adoption of the Bali Roadmap during the 13th Conference of the Parties to the United Nations Framework Convention on Climate Change is leading to forecasts that domestic plants will also be forced to reduce greenhouse gas emissions by a certain level after 2013. HMC is actively making efforts for the preparations. We are standardizing the management of harmful materials so that they are not contained in raw materials and not used in the manufacturing process. By establishing a clean production system that encompasses all partner companies, HMC is contributing to the preservation of the global environment and enhance environment-friendliness of the automobile industry. We are managing the material balance between inputs and outputs. In 2007, our domestic business facilities used 308 thousand tons of raw materials, 30.88 million GJ of energy, 11.683 million tons of water resources, and 2,635 tons of chemical substances, in the process of manufacturing 1.707 million automobiles and 2.376 million engines. During this pro-

cess, 1.526 million tons of CO2 were emitted. In addition, 639 tons of air pollutants, 192 tons of water pollutants, and 198 thousand tons of waste were generated.

Material balance in domestic business facilities and causes of environmental overload by process in 2007*

Air pollutants: 639 ton Greenhouse gas: 1,526,399 ton

Press Body Painting Decorative design Scrap/Noise Scrap/Waste sealer VOC/Stench, Packaging wastes Wastewater Energy: 30,881, 448 GJ No. of finished cars: Water resources: 11,683,059 ton 1,706,727 Raw materials: 308,001 ton No. of engines: Chemical substances: 2,635 ton Engine 2,375,737 manufacturing/ Molding Forging Assembly Molding sand Noise Waste oil/ waste, Wastewater Dust/Stench

* The scope of the domestic facilities to frame material balance includes Ulsan plant, Jeonju plant, Asan plant, R&D center, and customer service center. Water pollutants: 192 ton Wastes: 197,812 ton HMC applies the Greenhouse Gas emission calculation (Recycled: 151,104 ton) method by Korea Energy Management Corporation(KEMCO) to calculate GHG emission amount. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 65

Production Sites Fighting Against Climate Change

We are establishing a greenhouse gas emission reduction scheme at domestic business facilities. In 2007, we presented measures to reduce greenhouse gas emissions as a key agenda item to the Environ- ment Committee and established a strategic direction. Our objective is to maintain total greenhouse gas emissions in 2012 to the level of 2005, then reduce emissions by 10% from the 2005 level in 2017. Thereby we are making various efforts to accomplish it.

● Activities of the Greenhouse Gas Sub-committee In the second half of 2007, we established the Greenhouse Gas Sub-committee under the Environmental Production Committee, chaired by the Ulsan Plant CEO, the Head of Manufacturing Division, to effectively reduce greenhouse gas emissions at the production sites. A greenhouse gas inventory was established for each energy source and manufacturing process, based on which a strategy was drawn up to engage in reduction activities starting with areas with high potential for reduction. The key to greenhouse gas reduction is the promotion of efficient use of energy and development of new and renewable energy sources. In the short term, we seek to maximize energy efficiency based on existing production facilities. Further- more, we are looking into making considerable investments to adopt efficient production facilities and making a shift to new and renewable energy sources in the long term. Utility Team of the Ulsan Plant is the secretary of the sub-committee. The team supervises taskforce team activities and makes efforts to implement integrated execution measures that include the production technology sector, Asan Plant, and Jeonju Plant. Working-level taskforce team activities are regularly carried out every month, and involve identifying and implementing fundamental improvements that can be made for energy use reduction. In particular, the team is researching and looking into adopting facilities that ensure high energy efficiency to make the plants a low energy consumption structure. The Greenhouse Gas Sub-committee reports its activities to the Environment Committee every quarter. It is carrying out relevant activities at the corporate level after a deliberation and resolution process of the Environment Committee.

Environmental Production Committee Chairperson: Ulsan Plant CEO, the Head of Manufacturing Division Vice Chairperson: Vice manager of the Ulsan Plant

Greenhouse Gas Sub-committee Chairperson: General affairs manager in Ulsan

Secretary Utility Team manager | Production Technology Planning and Coordination Team manager

Plant Plant Plant Plant Plant Transmis- Engine Material Seat Asan Jeonju Production Technology No. 1 No. 2 No. 3 No. 4 No. 5 sion Transmission Management Technology Planning Team Technology Planning Team PT Production Technology Technology Department Facility Management 1 Facility Management 2 Facility Management 3 Facility Management 4 Facility Management 5 Material Management Tooling Planning Team Jeonju Environmental Engine Management Asan Environmental Hyundai Production Early Production Seat Production Planning Team Safety Team Safety Team Department Department Department 66 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

● Greenhouse Gas Reduction Target Management System In 2005, Ulsan plant established the Total Energy Management System (TEMS) that manages the cost and quantity of energy consumed, including electricity and LNG (Liquefied Natural Gas) to enhance efficiency in energy use. We are also building a new computer system that identifies potential reductions, sets reduction targets, and comprehensively manages the targets at the corporate level to efficiently manage greenhouse gas emissions of each manufacturing process and business facility. The new computer system will determine annual targets every year, based on the long-term roadmap for corporate- level greenhouse gas reductions. Afterwards, execution methods will be established and implemented to achieve the target assigned to each business facility. The system will be implemented to all domestic facilities, including the Ulsan Plant, Asan Plant, Jeonju Plant, Namyang R&D Center and A/S Center from the second half of 2008. The new system will interface data on each department’s energy consumption level and cost to the accounting system, and create a database of basic information to be used for environmental accounting. Moreover, we will identify potential greenhouse gas reductions in detail by building a system that monitors the characteristics of production processes and energy use (Utility Monitoring Management System or UMMS). We are taking necessary action to receive certification for the Energy Management System (EMS KS A 4000) as well, to save energy even more and further improve the reduction system.

● Establishment of an Inventory on Greenhouse Gas Emissions of Domestic 2007 Greenhouse gas inventory of Business Facilities domestic business facilities We are moving forward through establishing a greenhouse gas inventory to identify the status (unit: ton) of greenhouse gas emissions and potential reductions at all business facilities in Korea (Ulsan Plant, Asan Category Emissions Plant, Jeonju Plant, research institute, service centers, distribution centers, and Headquarters). The total

Direct LNG 500,635 greenhouse gas inventory for domestic business facilities in 2007 was 1.526 million tons of CO2. The total

emissions LPG 4,820 greenhouse gas inventory in terms of direct emissions accounted for 34.4% at 525 thousand tons of CO2;

Kerosene 3,381 and that in terms of indirect emissions accounted for 65.6% at 1.002 million tons of CO2. We are making Gasoline 579 improvements to the processes of minimizing hydrofluorocarbon and sulfur hexafluoride, although they are Light oil 6,715 used in small quantities. We are planning to strengthen the establishment of the greenhouse gas inventory

CO2 for welding 576 to cover all business facilities across the globe. HFC 7,799

SF6 41 ● Activities to Reduce Greenhouse Gas Emissions Indirect emissions 1,001,853 We installed heat recovery devices that recycle high-temperature waste heat that is generated (electricity) during the painting process, resulting in a considerable reduction in energy use. Around 50% of the heat Total 1,526,399 that has a temperature of 220 degrees Celsius is recovered, after which the temperature is lowered to 125 degrees Celsius. The recovered heat is used to produce steam, resulting in a 50% reduction in the energy usage for steam production. Moreover, efforts are being made to improve facilities that effectively prevent energy waste during non-working hours by optimizing the energy usage hours of production facilities. At material plants, we changed its “parallel resonance” smelting furnaces to “serial resonance” ones, thereby substantially improving efficiency in energy use. We became the first Korean company to introduce a system that uses waste heat from cooling towers to supply heating at plants and manufacturing processes.

We expect to reduce 4,000 tons of CO2 emissions. We are carrying out a national greenhouse gas reduction registration project to acquire official certification. Through these activities, we intend to cut down greenhouse gas emissions and achieve greenhouse gas emission-related targets. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 67

Reduction of greenhouse gas emissions through the recycling of waste heat at paint plants

Before After improvement improvement

Heat with a temperature Heat with a temperature of 220℃ of 125℃

Heat exchange RTO Painting RTO Painting

Hot water Increased temperature of pre-treated water Supply of steam Supply of steam (for standby) Increased temperature Boiler of pre-treated water Boiler

* RTO: Regenerative Thermal Oxidizer ● Greenhouse Gas Emissions by Energy Source Greenhouse gas emissions by energy Greenhouse gases emitted from two energy sources-electricity and LNG-consist of most of source at domestic business facilities the greenhouse gas emissions at domestic business facilities. Electricity 65.8%) and LNG (32.6%) use (2007) accounted for 98.4% of total energy consumption in 2007. The figure for other energy sources was merely 1.6% 1.6%. This demonstrates that the automobile production plants of HMC are mostly using more environment-friendly energy sources. 32.8% Meanwhile, HMC’s total greenhouse gas emission for all facilities were 1.827 million tons, 1.778 million tons, and 1.903 million tons, respectively from 2005 to 2007, while total vehicle production volume was 2.314 million units, 2.508 million units, and 2.618 million units, respectively. Interesting characteristics reveal when we compare GHG emissions to total production volume. □ LNG 65.6% □ Electricity Although our production level increased by 8.4%, 2006 greenhouse gas emission declined by 2.7% com- Others □ pared to the previous tear. This is primarily due to our investment in RTO heat recovery system resulted in enhancement of energy efficiency. Also, our response to global warming such as cutting energy consump- Changes in greenhouse gas emissions at tion for painting procedure led to the LNG use reduction. domestic and overseas business facilities There are three main reasons that explain the 7.1% GHG emissions increase when the amount of produc- of HMC tion increased by 4.4% compared to the previous year, higher level of plant operations in the US and China, trial operation of completed vehicles and material plants at Ulsan Plant; higher energy consumption for air Annual greenhouse gas emissions conditioning due to global warming. In order to overcome such difficulties, HMC plans to put more efforts (1,000 ton CO2) (ton CO2/100 million won)

3,000 5.48 6 that would decrease GHG emissions. 5.30 5.06 4.82 2,500 4.67 5

2,000 1,903 4 1,827 1,778 1,616 1,500 1,457 3

1,000 2

500 1

2003 2004 2005 2006 2007

□ CO2 emissions ● CO2 emissions per sales 68 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

● Participation in External Activities Long-term Project Established by the Ministry of Knowledge Economy to Analyze Greenhouse Gas Emission Reduction | The Korea Energy Economics Institute, Korea Automobile Manufacturers Association, and auto makers are jointly participating in a project operated by the Ministry of Knowledge Economy that involves analyzing potential greenhouse gas reduction capabilities of the automobile industry. The objective of this project is to carry out comparative analyses on various scenarios such as maintaining the current energy sources at automobile facilities and making a shift into new and renewable energy sources so as to determine the most cost-effective approach. This project, which started in the first half of 2007, is planned to be completed in the first half of 2008. The results are expected to be used to establish a long-term roadmap for greenhouse gas emissions reductions in the automobile industry. Conclusion of an Agreement for Voluntary Reduction of Greenhouse Gas Emissions | We are taking part in a program that involves the Federation of Korean Industries and automobile-related groups concluding an agreement for voluntary reduction of greenhouse gas emissions. Tangible results will be achieved in 2008.

Resource Circulation

HMC is continuously engaging in improvement activities that minimize the volume of waste and increase efficiency in resource use for resource circulation at production plants. For example, we developed recycling technology for paint waste sludge, VOCs fuel technology, and technology to re-use molding sand waste at production plants.

● Waste Reduction We are estimating the quantity of waste generated by making a classification into designated waste that are harmful to the environment and human body such as paint waste, waste oil, and battery waste generated from painting plants; and general waste such as molding sand waste used for the production of engines, other plastic waste, dust, and sludge generated from molding plants. We have been recycling metal scrap and paper waste by managing them separately since 2004. In 2007, the waste produced at domestic and overseas business facilities was 337,000 tons and roughly 76.9% was recycled. The remaining 23.1% was disposed (incineration: 10.8%; landfill: 8.2%; waste into the sea: 4.1%). To send less waste to the sea and landfills, we are continuously engaging in a wide array of improvement activities such as the development of molding sand waste recycling technology and technology to reduce water content in waste paint.

Status of waste disposal Quantity of waste generated Quantity of waste recycled (domestic and overseas) (domestic and overseas) (domestic and overseas)

4.1% (ton) (ton/100 million won) (ton) 8.2% 800,000 1.0 300,000

0.83 250,000 600,000 0.8 204,020 10.8% 0.65 200,000 175,432 0.60 166,505 400,000 0.6 150,000 337,224 100,000 223,155 223,242 200,000 0.4 50,000

□ Recycled □ Incineration □ Landfill 2005 2006 2007 2005 2006 2007 □ Waste into sea □ Quantity of general waste generated □ Quantity of designated waste 76.9% generated ● Quantity of waste generated per sales HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 69

● Conservation of Water Resources Changes in water resource utilization The global water usage will increase by 40% in 2025 in comparison to 1995. UN has desig- (domestic and overseas) nated Korea as a water-shortage nation. Thereby, we are making efforts to minimize the use of water (1,000 ton) (ton/100 million won) resources during the automobile manufacturing process in order to preserve water resources that are 46 20,000 43 45 becoming scarce resulting from an increase in the population and industrialization. In 2007, water usage 18,000 40 36 16,000 35 by HMC was 14.79 million tons and usage per sales was roughly 360,000 tons. Recycled water in 2007 14,798 14,793 14,000 16,852 30 was 855,000 tons, accounting for 5.8% of total water usage. We are strengthening improvement activities 12,000 25

10,000 20 and increasing facility investments for the efficient use of water resources.

8,000 15 In cleaning procedures, to reduce the water resource usage and waste water production, we are investing 2005 2006 2007 significant effort. The second painting factory of Ulsan established a rinse water recycling facility to reduce □ Quantity of water resources used ● Quantity of water resources used per sales amount of electro-coating rinse water used in cleaning procedures. These efforts led to lower concentration of waste water and higher recovery of electro-coat paints. Moreover, waste water generation reduced Changes in quantity of water resources by 33%. recycled(domestic and overseas)

(1,000 ton) 1,300 1,254 Reduction of Pollutant Emissions 1,200 1,177 1,100 1,000 We set company management standards that are much more stringent than legal standards on air 900 855 800 and water pollutants generated during the automobile manufacturing process, and is operating a monitoring 2005 2007 2007 system on pollutant emissions. By so doing, we are focusing on the thorough management of pollutant emission sources and activities related to reducing pollutants. To process high-concentration refractory waste that may Total quantity of air pollutants discharged be too difficult to process in the existing disposal facilities, we are using efficiency and toxicity assessments of (domestic) microbe treatments and making efforts in pollutant reduction through waste paint and sludge reduction.

(ton) 1,500 1,363 1,262 1,151 1,200 ● Air Pollutants

900 844 639 Air pollutants consist mainly of Volatile Organic Compounds (VOCs) that are generated when 600

300 painting the car body exterior including paint particles and dust. We set internal standards much more

2003 2004 2005 2006 2007 Management standard of air pollutants (unit: Sox, HCl, CO, NOx: ppm, PM: mg/sm³)

500 6.0 600 100 120 120 120 Domestic legal standards

40~45 30 Company 150 standards 1.2 15 50 50~60 3 Actual range of emissions 0.3~0.6 9~11 2~3 12~15 12~15

Smelting furnaces Incinerator Cupola Induction melting furnace | Cupola | Other facilities Sox HCl CO NOx PM 70 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

stringent than legal standards and is minimizing the production of air pollution material. In 2007, amount of air pollutants decreased 24.3% compared to the previous year and recorded 639 tons. Compared to the previous year, there was a reduction of 100% in terms of CO and NOx, 91.2% in SOx, and 11.2% in PM. This has been made possible by Ulsan Plant changing its cast iron procedure to a light alloy procedure, resulting in the shutdown of the cupola. In addition, The material plant substantially reduced air pollutant emissions by improving the dust collector that collects and purifies dissolved dust and harmful gases discharged from the aluminum smelting furnace. We established more stringent company standards on smelting furnaces so that the quantity of PM is maintained at 30mg/Sm2 or lower and that of HCl is 1 maintained at 1.2ppm or lower. The previous pall ring-based dust collection method involved spraying water to create a water curtain on the pall ring, which then collected dust. This approach had its negative aspects, such as low efficiency in collecting dust and the generation of secondary waste – pall ring. The improved method, which is the immersion-based dust collection method, places polluted materials into the water located at the bottom of the dust collector to collect spores. There are no pall rings inside the dust collector and therefore no clogs. The new approach also ensures a high level of efficiency in dust collection and does not discharge secondary waste. We adopted this new approach in 2007, and is planning to employ it at other business facilities as a measure against air pollution.

2 We also improved the work environment, enhanced work efficiency, and reduced odor in nearby areas by

1 Dust collectors for casting machines of LP I and II at the first light installing dust collectors for casting machines and the removal of gate dust at the fourth cast iron plant and alloy plant light alloy plant in Ulsan and also changed the dust collector at the forging plant. 2 New dust collector with a capacity of 6000, 6500 tones at the forging plant to improve working conditions Improvement to the dissolved dust collection method

Incoming Clean air discharge dust Clean air Clean air Separation of Dust micro discharge discharge moisture filter Demister Spray Incoming dust Pall Ring Spray Incoming dust Pall Ring

Incoming dust Sinking Separation of water Nozzle of dust Water

Previous dust collection method Improved method [pall ring-based] [immersion] HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 71

● Water Pollutants A considerable quantity of water resources is used during the automobile manufacturing process such as coolants and hot water for heating. HMC deems it an important task to efficiently manage the resulting wastewater. We manage with our own water pollutant regulation that is more severe than the legal regulations. Contaminants are divided into several classifications for management: Biochemical Oxygen Demand (BOD), Chemical Oxygen Demand (COD), Suspended Solids (SS), and mineral oil (n-H).

Water pollutants generated by Water pollutant management standard domestic business facilities (mg/ℓ) 100 (ton) (kg/vehicle) 90 90 80 80 0.11 80 300 0.11 0.11 70 250 0.10 60 0.09 50 200 193 0.08 187 0.08 40 40 150 30 30 30 129 0.07 20 100 0.06 10 5 50 2 2005 2006 2007 COD BOD SS n-H □ Total quantity of water pollutants generated ● Generated quantity by vehicle (kg/vehicle) □ Company standards ● Legal standards

We are continuously engaging in improvement activities to reduce the volume of wastewater which is mainly produced from vehicle cleaning, paint dust collection procedures in paint plants, and engine gear parts manufacturing, as well as sewage from facilities. The Ulsan Plant runs seven disposal units that process wastewater, two unified sewage/wastewater disposal units, and one wastewater disposal system. The Asan and Indian Plant adopted a zero wastewater discharge system, and are thus being operated as clean production plants that do not discharge any wastewater. In particular, the Ulsan Plant is engaging in a wide array of activities, such as planting water hyacinth, which are free-floating perennial aquatic plants that are known to be effective in removing nitrogen and phosphorus from water, in the sedimentation and transfer tanks at the unified sewage/wastewater disposal units to ensure ecological-friendly wastewater treatment. According to the policies of the Ministry of Environment, We have been sending water treated at the Ulsan Plant to the Bangeojin Sewage Treatment Plant since 2007. The density of the discharge has been increased so as to maintain the operational load of the sewage treatment plant of Ulsan Metropolitan City. In 2007, the quantity of water pollutants generated by domestic business facilities was 187 tons, recording a year-on-year increase of roughly 33%. This resulted from softening water pollutant management standards to the level of legal standards – 80ppm BOD, 90ppm COD, 80ppm SS - in tandem with the abovementioned changes.

1 Transfer tank at the unified sewage/wastewater disposal units in Area I 2 Sedimentation tank at the unified sewage/wastewater disposal units in Area II 1 2 72 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

● Volatile Organic Compounds(VOCs) Changes in the quantity of VOCs gener- Many companies have recently been minimizing VOCs in consideration of their negative impact ated at domestic business facilities on the environment and human body. In 2007, the domestic production of VOCs was 10,019 tons and the

(ton) (kg/vehicle) recovery rate of organic solvent was 43%. VOCs are used for diluting paint and cleaning coating machines 25,000 7 6.1 for effective vehicle painting. We are continuously performing improvement activities to reduce their use. 20,000 5.3 5.9 6 5 15,000 10,289 10,019 4 10,000 8,077 Use of Waterborne Paints | To lessen the use of VOCs, we are replacing oil based paints with 3 5,000 2 waterborne paints. Paints for vehicles consist of four materials (resin, pigment, solvent, and additives). Depending on the solvent, there are two types of paint; oil based paint and waterborne. Waterborne 2005 2006 2007 paints use pure water as a solvent and are environment-friendly paints. In 2002, EU and US strengthened □ Quantity of VOCs generated (Domestic) ● Quantity of VOCs generated per manufactured vehicle (Domestic) the environmental regulations on imported automobiles with high amount of VOCs emissions. To qualify the regulations, we replaced the organic paints we previously used with waterborne paints. We greatly Changes in the recovery of VOCs at domestic decreased the amount of organic solvent(g) used per electro deposition area (m2) of an automobile and business facilities the amount of VOCs discharged into the atmosphere during the coating process by utilizing booths.

(1,000ton) (kg/100 million won) 6,000 50 43% 5,000 37% 37% 40 Regenerative Thermal Oxidizers (RTOs) | To remove VOCs emitted from painting plants, we are operat-

4,000 3,705 30 ing Regenerative Thermal Oxidizers (RTOs). An RTO is a device used to incinerate (around 800℃) VOCs. 3,439 3,225 3,000 20 By storing heat that is generated during the incineration process in a ceramic material, it maximizes heat 2,000 10 efficiency during the waste gas treatment process. With RTOs, we are reducing the VOCs and stench 1,000 1,000 emission density at painting plants, thereby contributing to environmental improvements at the business 2005 2006 2007 facilities and neighboring areas. □ Quantity of VOCs recovery ● Ratio of VOCs recovery

● Hazardous Substances Hazardous substances refer to chemical substances harmful to the human body and the global environment and include toxic and other chemical substances. Throughout many advanced nations, chemical substance-related regulations are currently being reinforced and becoming a pressing issue in corporate exports and international trading. The EU enacted the Registration, Evaluation, and Authoriza- tion of Chemicals (REACH) regulation in June 2007. With the enforcement of the REACH ordinance, those enterprises exporting chemical substances and products that contain chemical substances to EU nations must make a pre-registration during the pre-registration period (June 1 – November 30, 2008). Installation and operation of RTOs(Ulsan Plant) We are fully aware of what tasks need to be addressed in relation to the REACH ordinance, including pre-registration and formal registration, and is taking measures accordingly. We are separately managing poisonous substances, such as sodium hydroxide, sulphuric acid, nitric acid, and hydrochloric acid, and making efforts to reduce their use. In 2007, the quantity of hazardous materials used domestically by HMC was 2,635 tons, posting a 6% increase from the previous year, but the quantity per vehicle increased by 0.85%. This is because the casting plant in Ulsan used more sodium hydroxide (NaOH) to control odor. The

amount of chemicals used per vehicle went down in case of H2SO4, HNO3, and HCl. We are developing a computer system that can comprehensively manage hazardous substances by inter- facing with the VAATZ (Value Advanced Automotive Trade Zone) system, which is a purchasing system, to effectively manage hazardous substances that are used in the manufacturing process. The plan is to fully launch the system in the second half of 2008. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 73

Moreover, we established a strict internal management scheme for ozone depleting substances and Total consumption of hazardous chemical implemented a corporate-level policy that prohibits the use of ozone depleting substances throughout all substances by domestic business facilities manufacturing processes and our partner companies. We are making efforts to preserve the global envi-

(ton) (kg/vehicle) ronment. We are also implementing various research initiatives to establish an atmosphere management 3,500 1.53 1.54 1.6 process inside and outside its manufacturing processes by building reduction technology for hazardous 3,000 1.30 1.4

2,635 1.2 2,500 2,478 substances generated during the manufacturing processes, developing a model of pollutants in the atmo- 2,190 1.0 2,000 sphere, and constructing a design support system for ventilation equipment. 0.8 1,500 0.6

2005 2006 2007 Environmental Expenditures □ Total consumption of poisonous substances (Domestic) ● Consumption per source (kg/vehicle) We calculate the environmental expenditures of three domestic plants (Ulsan, Asan, and Jeon- ju) and break them down into five items stated in the table below every year. A classification is made into the direct expenditures of environmental pollution reduction that is associated directly with environmental facilities and equipment, the indirect expenditures of environmental pollution reduction that is spent for environmental education for employees and environmental activities, the environment risk management expenditures for legal compliance, disposal and recycling for consigned waste treatment and waste recycling, and lastly, the social environmental activity expenditures for local environmental campaigns and green area management. In 2007, the environmental expenditures of the three domestic plants were 54.1 billion won, and the recycling profit derived from selling wastes totaled around 28 billion won. We are planning to more systematically manage environmental expenditures by adopting an environmental accounting system.

Total environmental expenditure of the three domestic plants in 2007 (unit: one million won)

Category Main items Total amount Environmental expenditures Direct expenditures of environment pollution reduction 26,655 Indirect expenditures of environment pollution reduction 14,129 Environmental risk management expenditures 120 Disposal and recycling expenditures 8,884 Social environmental activity expenditures 4,314 Sub-total 54,102 Environmental profit Profit from recycling (Proceeds from selling waste) 27,994

74 Environmental Management

44 Efforts to Minimize the Impact of the Climate Change 55 Reduction of Gas Emissions 58 Increased Recyclability 64 Clean Production

Acquisition of the ISO14001 Certification

To actively respond to environmental regulations of countries around the world and strengthened monitoring by environmental NGOs, we have been acquiring the ISO14001 certification which is an international standard on environmental management system established by the International Organiza- tion for Standardization. All production plants in Korea acquired the certification. The Chinese plant also acquired the ISO14001 certification in August 2006, followed by the acquisition of the certificate by the US plant in December 2007. This is a part of efforts made by the company to provide cooperation for environmental management at the respective nations and achieve early stabilization of the new overseas plants by building an internal environmental management system. We will continuously improve the environmental management system in line with the follow-up audits conducted every three years. The company plans to have more newly created overseas plants and partner companies acquire the ISO14001 certification.

ISO 14001 certification status Business facility Date of certification Certification body Ulsan Plant (including Headquarters, Dec, 1995 TUV-KOREA Namyang Research Center, and A/S Center) Asan Plant Apr, 1998 TUV-KOREA Jeonju Plant May, 1999 TUV-KOREA India Plant Mar, 2003 TUV-INDIA Turkey Plant Jul, 2003 TSE China Plant Aug, 2006 China Certification Center, Inc. US Plant Dec, 2007 VCA

1 US plant certified to ISO 14001(2007.12) 2 China plant certified to ISO 14001(2006.8) 1 2 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 75

HMMA, Settlement of Environmental Management via Acquisition of the ISO 14001 Certification

John Applegate (Senior Manager, Plant engineering, in charge of implementation ISO 14001 for HMMA)

HMC promoted ISO 14001 certification of HMMA for environment-friendly operation. Since ISO certification is the process that necessitates involvement of the whole plant, almost a year was spent prepar- ing HMMA for the certification process. First and foremost, all relevant team members established specific action plans to adjust internal processes in accordance with ISO 14001 and documented them. These documentations were later used as guidelines for internal evaluation assessing the level of compliance with ISO 14001 and discovering shortfalls that were later fixed. Active participation of general managers and team members from all the departments helped their level of understanding on environmental management and ISO 14001 certification. Through these efforts, HMMA also prepared for external audit. As a result, HMMA met all the requirements of ISO 14001. Also, any minute problems discovered in the process of implementing ISO 14001 were fixed immediately, which smoothened the certification process. More importantly, through the process of the ISO certification, employees increased the perspective of saving resources and obtained the effect of the reduction in energy consumption. We will continuously practice environment-friendly management by analyzing internal success factors to obtain renewal of ISO certification and environmental achievement. PEOple & Society

HMC strives to fulfill sustainability commitments as well as to promote corporate growth based on the partnership and cooperation with the stakeholders.

Building Mutually Beneficial Labor Relations HMC labor and management have pursued mutually beneficial relations and promoted mutual trust by holding a regular meeting on business performance and labor-management events. As a result, in 2007, HMC labor and management reached a wage agreement without labor strikes. In addition, labor union members re-elected the union leader who successfully made the 2007 wage agreement as the leader for 2008, further stabilizing the labor relations.

page 79 78 Employees 92 Shareholders and Investors 99 Social Contribution Employee Status Shareholders' Meeting and Dividend Social Contribution Philosophy and Vision Building Trust Stock Dividend for Employees Progress and Plans Respect for Human Rights More Effective Communication with Shareholders Social Contribution Activities in Korea Employee Education Global Social Contribution Employee Benefits 95 Customers Industrial Safety and Health Customer Satisfaction Customer First Management 85 Suppliers Marketing Mutual Cooperation Support for Green Management of Suppliers 78 People & Society

78 Employees 85 Suppliers Employees 92 Shareholders and Investors 95 Customers 99 Social Contribution

In accordance with the principles of Trust-based Management, Environmental Management, and Transparent Management, we pursue to create the prosperity of company along with the development of job satisfaction. We make efforts to recruit competent workforce, develop global human resources, and help employees realize their potential. Moreover, we provide various employee benefits to improve employees’ quality of life. Our employees are committed to the growth of HMC, while pursuing a balance between work and life.

Employee Status

● Number of Employees Number of employees in Korea As of December 2007, the number of our employees was 76,704, a 1.76% increase com- (As of December 31, 2007)/(unit: number of employees) pared to the previous year. 55,939 employees work in domestic offices and plants, while 20,765 work in

60,000 overseas Hyundai Motor Companies. We are striving to create employment every year and contribute to 58,000 55,939 56,000 stabilizing employment in Korea and overseas. 54,440 54,973 54,000 52,000 50,000 1.76% Domestic employees by job category Employees on overseas increase 0.98% (executives included) (As of December 31, 2007)/(unit: number of employees) increase (As of December 31, 2007)/(unit: number of employees) 232 2005 2006 2007 6,365 298 3,184 11,118 6,961

5,931 55,939 20,765 □ Administration □ R&D 5,314 □ North America □ Production and □ China 32,227 maintenance □ India □ Sales 5,074 □ Europe □ Other □ Other

● Respect for Employee Diversity

Local Recruitment | Through the global management initiative, we have aggressively entered the overseas markets and recruited employees from the local community. In 2007, the number of local employees increased by 4.97% from previous year to 20,765, accounting for 27.07% of the total HMC employees. We contributed to the local economy by hiring employees from the local community and treated all employees equally, regardless of their nationality, culture, ethnicity, language, and religion.

Equal Opportunity | HMC is stepping up its effort to hire more female employees and allow to work along with male employees on an equal footing. The proportion of female employees to the total workforce at HMC is at 4.06%. In 2007, the number of domestic female employees increased by 1.52% compared to the previous year with 2,270 employees. We offer a daily leave every month and a 90-day maternity leave to female employees to improve their working conditions. Some of our offices and plants operate a workplace childcare center. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 79

Number of female employees in Korea Yearly female employees recruitment status (As of December 31, 2007)/(unit: number of employees) (unit: number of employees)

2,300 2,280 2,270 Male Female Total Recruitment Female Proportion (%) 2,260 2005 1,019 88 1,107 7.9% 2,240 2,229 2,230 2,236 2,220 2006 862 91 953 9.5% 2,200 2,193 2,180 2,178 2007 635 95 730 13.0% 2,160 Average 2,903 317 3,220 9.8%

2002 2003 2004 2005 2006 2007 Building Trust

● Mutually Beneficial Labor Relations

Labor-Management Expert Committee | In 2007, we established the Labor-Management Expert Com- mittee to develop mid-and long-term vision for building trust between labor and management and to lay the basis for constructive labor relations. The Labor-Management Committee consists of ten members, five experts each recommended by the labor union and the management. The committee conducts a study on labor issues and holds meetings where working-level managers and labor experts discuss labor issues to build effective labor relations.

Wage Negotiations without Strikes in 2007 | We respect three labor rights protected under the Con- stitution and guarantee labor union activities within the scope of applicable laws. In addition, we have held meetings of the Central Labor-Management and Working-level Labor-Management Committee in each quarter by plant or business department in order to address labor issues in a timely manner and promote mutual trust and understanding between labor and management. Some uncertainties exist, as the HMC Labor Union is one of the largest labor unions in Korea and repre- sents the auto industry. However, our labor and management have pursued mutually beneficial relations and promoted mutual trust by holding a regular meeting on business performance and labor-management events, and dutifully participating in wage negotiations. As a result, in 2007, our labor and management reached a wage agreement without labor strikes, which occurred first time over the past few years. Additionally, labor union members re-elected the union leader who made the wage agreement with the company in 2007 as the leader for 2008.

● Employee Idea Proposal

Idea Competition | Holding the 2007 Idea Competition, held between March to October, helped employees share ideas and knowledge to reduce costs and improve profitability. Ideas selected from the competition and proposals from group discussions helped us save 95.8 billion won and 19.7 billion won, respectively. In sum, in 2007, we were able to cut costs worth 115.5 billion won, which exceeded the 2007 cost reduction target by more than 20%. In 2007, the number of ideas proposed by one employee increased by 1.1 to 9.9, and the rate of ideas selected increased by 6.1% to 97.1%. In addition, the number of proposals made in a group discussion and adopted by company increased by 15.2% to 2,408. 80 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

Idea Competition and group discussions (Cost saved, unit: 100 million won)

Year Idea Competition Group discussions Total cost saved Number of Cost Number of Cost ideas saved proposals adopted saved 2005 432,141 598 2,027 179 777 2006 426,204 730 2,090 180 9010 2007 452,199 958 2,408 197 1,155

In addition, we have kept "Employee Proposal Log" in many corners of each plant to accept any ideas and complaints about production from employees. In particular, the Asan Plant held "the Idea Competition for a Better Workplace" to encourage employees to present innovative ideas to improve the workplace. This on-site event contributed to promoting communication, mutual trust, and respect among employees, and creating a better workplace.

CAP Meeting in the Hyundai-Kia R&D Center | The Hyundai-Kia R&D Center has held a Communication, Action, and Performance (CAP) meeting to encourage employees by proposing creative ideas. In a CAP meeting, employees discuss organizational problems and present solutions to the problems. Through the CAP meeting, employees voluntarily suggest a creative proposal to improve business performance. The Hyundai-Kia R&D Center built the CAP e-Lounge, a system designed to help employees share and manage ideas and proposals presented in a CAP meeting. In January 2007, the Hyundai-Kia R&D Center hosted "Thanks Cap 2007," which promoted sharing information on CAP activities and celebrated the best ideas adopted by the company.

Respect for Human Rights

● Declaration of Respect for Human Rights of Employees In 2001, we prepared and announced the Ethics Charter, which states our company respects of legislations on human rights protection in each country and global human rights protection standards. Fur- thermore, we opened the Office of Ombudsman and Employee Complaints Center to deal with difficulties employees facing and have operated various programs to protect human rights of employees by country, region, and culture.

● Employees' Right to Association We respect employees' right to establish a labor union and other representative bodies cor- responding with domestic and foreign labor laws. Currently, the HMC Labor Union has been established in Korea, and the Labor-Management Consultation Committee is operated in Hyundai Motor India(HMI), and the Public Assembly is established in Beijing Hyundai Motor Company(BHMC). As of December 2007, 43,659 out of 55,914 employees are members of our labor union. We provide our employees with job security and employees make a concerted effort to improve the quality of vehicles and vehicle sales in order to contribute to the growth of HMC, creating mutually beneficial labor relations. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 81

● Promotion of Local Employee's Participation in the Decision-making Education status for domestic Process and Respect for Opinions of Local Employees HMC employees Overseas R&D centers mostly consist of engineers and researchers from local residents. In

Category Number Total Average hours conformity with the local recruitment principle, we allow local employees to actively participate in the of hours of of education management. Particularly, the highest decision-making body at BHMC appointed a local resident as a employees education per employees director. We respect and reflect opinions of local employees in the decision-making process. Administration 11,122 1,306,694 117 Production 29,080 582,776 20

Sales 6,414 212,606 33 ● Prevention of Child and Forced Labor HMC does not hire children under the minimum age for employment and support strictly re- Engineering 2,408 100,807 42 inforced relevant laws in each country. Our workforce only consists of people who are willing to work for R&D 5,680 550,590 97 HMC. We provide fair compensation for labor to our employees, adhering to pre-defined work hours and Total(Average) 54,704 2,753,473 50 wage policy of each office or plant and labor laws in each country. * Education participation: full-time employees(As of September 2007) * Total hours of education = (number of employees) X (hours of education) ● Prevention of Sexual Harassment at Workplace * Average hours of education per employees = (total hours of education) X (number of employees) We completely prohibit physical, verbal, and visual sexual harassment and stalking. Our company complies with provisions on prohibiting workplace sexual harassment specified in the Equal Employ- 2007 Education Framework and Direction of the Main Objectives ment Opportunity Act and operates the Sexual Harassment Center in order to create a workplace with

Spread organizational culture no sexual harassment. Every sexual harassment case is investigated and escalated to the Disciplinary share the core value of corporation, Committee. We strive to disclose any disciplinary actions against the harassers to prevent recurrence. conduct education program to all employees Moreover, we provide all employees with education twice a year on prevention of workplace sexual ha- Strengthen global capability rassment, according to the Equal Employment Opportunity Act. We also offer education on prevention of systematize the support of education program toward overseas business operations(Establish global standardized workplace sexual harassment to employees in overseas plants and offices following laws and regulations education program), train local exports,develop language in each country. education programs linked to business performance

Build basis of education focusing on capability strengthen the structure of the education programs to enhance work performance, classify education courses Employee Education by job category

Aim for innovative performance ● Education Programs share the core value of corporation, conduct education program to all employees Our education program has been expanded to employees' families, stakeholders, and retirees. Also, education areas have been expanded to include culture and art in addition to on the work related training. In 2007, HMC provided various education programs to all employees including new employees to promote common values and employee morale. In order to increase global competitiveness, we also developed education courses for employees in overseas plants and offices, and created education programs like foreign language courses to nurture regional experts. We developed education programs closely linked to business performance and differentiated education courses by job category to nurture competent workforce.

Domestic Employee Education | We provided all employees with both internal and external training courses. In 2007, the average number of training hours per employee was 50 hours receiving education on capacity building, foreign languages, and business management via on-line. In providing education, we expanded the areas to include not only OJT(On the Job Training) such as technical skill, sales, and maintenance but also life design, child education, and seminar to provide differentiating education courses

2 1 | 2 Education of new employees in 2007 82 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

to each employee by job category. Additionally, we have partially implemented the Individual Development Plan (IDP). With the IDP, employees attend education courses to complement their weaknesses, after making a self-development plan and receiving a capacity diagnosis.

● Continuous Education The Hyundai-Kia Learning Center manage and provide information on education courses for HMC employees. It is designed to provide continuous education to HMC employees. The Hyundai-Kia Learning Center offer on-line courses on foreign languages, OJT, and business management to help employees receive education regardless of time or location.

● Education for Retirees Those who plan to retire can receive education to prepare for life after retirement. We provide education courses on change management after retirement, opening a business, preparation for re-employment, wealth management, health management, and exchanges of information among retirees. In 2005 and 2006, 65 out of 77 employees and 32 out of 131 employees, respectively, attended education courses. However, in 2007, we did not open education courses as the retirement age was extended.

Employee Benefits

● Employee Benefits Various and flexible employee benefits are being offered to meet the needs of employees. 1 HMC Marathon Club participating in the Kyungju Cherry Blossom Marathon in April 2007 Currently, we provide employees with National Health Insurance, Industrial Accident Insurance, National 2 Happiness Engine Concert, a concert tour for HMC plants in Pension, Employment Insurance, and regular medical examinations, in accordance with laws. Korea HMC also voluntarily offers employees with other benefits. Benefits include living expenses assistance such as financial aids, housing assistance including a free company house or dormitory, and health and hygiene benefits. Additionally, we operate cultural and motivational activity assistance program. Overseas Hyundai Motor Companies also provide various benefits to their employees, depending on local culture and laws and regulations.

● Support for Cultural Activities HMC encourages employees to participate in various club activities. In 2007, the Asan Plant 1 encouraged every employee to join at least one club, and the Ulsan Plant hosted a club festival. In June 2007, we hosted ‘Power for Passion and Happiness,’ an in-house club festival, to celebrate employee club activities. We have supported employees to participate in various cultural events where they can recharge and increase morale. In 2007, we hosted ‘Happiness Engine Concert’ touring plants and offices across the nation, and became the first Korean company to provide employees with literature contents on-line. By opening the ‘Yangjae Atrium’, an art gallery, we offered our employees an opportunity to appreciate art. 2 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 83

Clubs at HMC in 2007 (Unit: number of employees)

Category Headquarters Ulsan Plant Asan Plant Jeonju Plant Hyundai-Kia R&D Center Sports 329 4,636 829 1,322 1,038 Hobby 483 2,303 454 688 734 Volunteering - 5,032 254 226 35 Religion 36 551 253 292 65 Learning - - 27 - - Total 848 12,522 1,817 2,528 1,872

Website for HMC employees ● Living and Housing Expenses Assistance Gym for HMC employees We offer company houses, dormitories, or long-term loans with lower interest rates to em- http://health.hmc.co.kr ployees who do not own a house in order to help employees work in stable living conditions. Moreover, Happy World we operate a non-profit mutual savings system, where fund deposit by employees is used as loans for http://wellbeing.hmc.co.kr employees and interest is provided to depositors as a dividend. Cultural events for employees of the HKMC Group HMC operates the Administrative Service Center and Legal Advice Center to help employees easily get ad- http://culture.hyundai-kiamotors.com ministrative documents and legal advice. The Counseling Center in the Hyundai-Kia R&D Center particularly Social Contribution Festival of the HKMC Group provides employees with expert counseling service for personal matters. In January 2007, the Asan Plant http://festival.hyundai-kiamotors.com invited legal law advisers to provide free law consulting to employees on the production floor.

Industrial Safety and Health

● Industrial Safety and Health System i-ESH, an Integrated System for Environmental Safety and Health | We operate i-ESH, which is ac- cessed via the HMC Intranet and efficiently supports the ISO 14001 standard for green management. i-ESH contains vast information on environmental safety and sanitation regarding each domestic plant. The recorded information is organized into statistical data of diverse formats and used by the employees

Safety management

Environment i-ESH Health management System management

Statistical data 84 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

working in related areas. To allow our employees easily access information on safety, health, and the environment, i-ESH further offers information and education materials on safety, health, and the environment as well as relevant laws and regulations, and technological standards. iesh.hmc.co.kr

Industrial Safety and Health Committee | The Industrial Safety and Health Committee consists of seven managers recommended by labor and another seven managers recommended by management to deal with matters related to industrial safety and health. The committee has a regular meeting in each quarter and special meetings whenever an industrial safety and health issue is raised.

● Prevention of Industrial Accidents and Medical Assistance

Preliminary Assessment and Safety Campaigns | HMC provides education and conducts a preliminary assessment through the safety inspection to protect employees’ safety at a workplace. The Ulsan Plant operates a 24-hour emergency center to reduce damage caused by industrial accidents. Employees can contact the center by calling 119. The Asan Plant also conducts safety inspection twice a year and measures the working environmental quality to detect elements harmful to employees on the production floor. We conduct a safety check on a specific area every month and allow the Ministry of Labor to conduct an inspection on the compliance with plant safety guidelines once a year. Each HMC plant adopts various preliminary assessments to prevent traffic accidents and fires.

Industrial Medical Centers and Medical Examinations | Industrial medical centers and dispensaries in domestic plants continue to provide medical cares in preparation for sudden accidents and occupational health. In accordance with the Industrial Safety and Health Act and collective agreements with the labor union, HMC provides all employees with medical check-ups once a year and comprehensive medical examinations to employees and their families who are over 35 years old. We pay the full costs for general medical check-ups and tests, and half costs for comprehensive medical examinations. Moreover, we offer medical expenses aids for employees and their families for other medical reasons. The Industrial Medical Center in the Asan Plant operates a 24-hour emergency room and hires medical specialists to provide qual- Annual industrial accident rate ity medical service to employees. When the Ministry of Labor inspected occupational medical centers run (unit: %) by private companies in Korea in January 2007, the Industrial Medical Center in the Asan Plant received

1.80 the highest score in the quality of medical specialists, equipment, sampling methodology, and medical 1.70 1.60 examinations. 1.50 1.40 1.30 1.20 Industrial Accidents | Since 2004, the industrial accident rate at HMC has been on the decrease because 1.10 1.00 of preliminary assessments, preventive measures, medical check-ups, and the industrial medical centers. In 2007, the industrial accident rate of HMC was 1.68%, compared to 1.74% in 2006. Nonetheless, it was 2005 2006 2007 still higher than the average industrial accident rate of 1.10% in the Korean manufacturing industry due to □ Korea's manufacturing 1.28 1.18 1.10 industry average the aging population of employees and long period of working time. In order to decrease the accident rate, □ HMC 1.64 1.74 1.68 we provide the information of i-ESH system and conduct surveys to reflect the employees’ expectations. People & Society 85

78 Employees 85 Suppliers Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

Maintaining cooperative relationship with the suppliers based on mutual trust is the most important factor in producing a vehicle which constitutes about 20,000 auto parts. As we acknowledge the high correlation between the quality of the parts and competitiveness of vehicle, we operate a system where suppliers can construct safe management conditions with an excellent technology, high quality, and responses to various regulations.

Mutual Cooperation Completion of mutually 2009 beneficial relations ● Overview of Mutual Cooperation We develop and implement strategies to promote collaboration with suppliers. The areas that HMC focuses on to promote mutual cooperation include core competency, stable business management,

2006 Development of mutually global competitiveness, and support for suppliers of suppliers. We established the Mutual Cooperation ~ 2008 beneficial relations Team within the company, the Foundation of Korean Automotive Parts Industry Promotion outside the company, and the Working Group on Mutual Cooperation, which serves an arbitrator. We have promoted mutual cooperation since 2003, and reinforced mutual cooperation since 2005. HMC plans to further

2003 Foundation for mutually increase mutual cooperation with suppliers by 2008, and develop effective mutual cooperation programs ~ 2005 beneficial relations by 2009.

Core competency · 5-Star Club · Guest Engineer System · Support for technology development assistance · Foundation of Korean Automotive Parts Industry Promotion

Support for suppliers of suppliers · SQ Certification Stable management · Quality Service Volunteer Programs to · Cash payment Group(Foundation of Korean promote mutual · Capital assistance Automotive Parts Industry Promotion) · Shared cost reduction · Vocational training consortium cooperation · Support for information and expanded joint procurement system and joint procurement · Management innovation seminars

Global competitiveness · Nurturing global human resources · Advance into overseas markets · Response to global environmental regulations 86 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

● Strengthening Suppliers’ Core Competency

5 Star System | By operating 5-Star System, we help suppliers enhance the quality of vehicle parts 5-Star quality club Symbol and improve their competitiveness. The 5 Star System selects member suppliers based on an objective quality assessment. Suppliers who acquire 5 stars in the quality assessment can join the 5-Star System to receive various benefits. It was proved that the 5-Star System actually helped suppliers improve their product quality, as the average rate among suppliers increased from 3 stars (63.6 points) in 2002 to 4 stars (79.4 points) in 2007.

Suppliers that have joined the 5-Star quality club Category Supplier Existing members BorgWarner Transmission Systems Korea, Heesung Catalysts, (12 companies) Namyang Industry, Sejong Industrial, Hanil E-Hwa, Kyunshin Industrial, Sewon ECS, Yura, Sejung, Seojin Industrial, Sungwoo Hightech, KEFICO New members First half of 2007 Halla Climate Control (3 companies) Second half of 2007 THN Corporation, Korea Autoglass

Guest Engineer System | The Guest Engineer System is designed to nurture competent engineers by inviting engineers of HMC suppliers to HMC to conduct a joint research. In 2007, a monthly average of 232 engineers from 48 suppliers were invited to HMC to participate in developing and revising parts designs to improve products manufactured by suppliers. With the Guest Engineer System, we aim to nurture engineering workforce of suppliers, transfer design expertise to suppliers, reduce the product development cycle, and minimize design failures.

Benchmarking studies on advanced Support for Technology Development | We are grasping the trends in the latest technology developed technology by competitors in collaboration with suppliers. In 2007, we conducted a benchmarking study on 16 car Year Number of Number of Number of models, and provided 1,477 tear down parts of 11 models to suppliers free of charge. By 2008, we plan to models participated participated conduct a benchmarking study on 21 car models. suppliers engineers Additionally, HMC hosted 12 new technology exhibitions and 183 new technology seminars to help sup- 2005 19 657 1,634 pliers develop parts technology. In November 2007, we hosted the 2007 R&D Supplier Tech Day to offer 2006 22 679 1,861 HMC suppliers in Korea an opportunity to promote their new technology and share technology information, 2007 16 415 1,071 and reinforce trust between HMC and suppliers. Total 57 1,751 4,566

Foundation of Korean Automotive Parts Industry Promotion | In July 2002, HMC, Hyundai Mobis, and 164 suppliers co-founded the Foundation of Korean Automotive Parts Industry Promotion (FKAPIP). In Management Innovation Seminar for CEOs of suppliers the first year, we donated 5.1 billion won to the FKAPIP, and have contributed about 5 billion won to the FKAPIP every year. The FKAPIP help suppliers improve competitiveness and business management as an organization designed to develop the auto parts industry. In 2007, "the Quality Technology Volunteer Group" under the FKAPIP guided 112 suppliers to develop new technology. Also, "the Supplier Supporters," which consists of former HMC executives, have been dispatched to 28 suppliers to provide voluntary management advice. The FKAPIP provided 216 secondary suppliers with on the job training, access to parts database, and used equipments without any charge. Moreover, it hosted technology seminars and conferences for suppliers of suppliers. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 87

● Support for Management Stabilization of Suppliers

Cash Payment | As a means to help small and medium-sized companies facing difficulties caused by high oil price and other market challenges, we are disbursing cash to such companies for goods supplied and shortened the period for promissory note payment from 120 to 60 days. In addition to continuing this policy next year, we plan to introduce further improvements to payment conditions for the secondary and tertiary suppliers as well. In 2007, we paid 8.2 trillion won to small and medium enterprises (SMEs) in cash.

Joint procurement by year Payment (unit: 100 million won) Category Payment means Term Year 2006 2007 2008 Parts for export Cash Once a month

(expected) Parts for domestic use SMEs* Cash Once a week Suppliers 593 542 800 Big enterprises Bill Secondary suppliers 25 134 200 Amount 618 676 1,000 Capital Assistance | In order to help suppliers stabilize business management, we offered suppliers grants worth 2.3 trillion won including raw materials procurement aids, R&D grants, investment assistance, and emergency operating capital aids, in 2007. In addition, we provided the Network Loan worth 296.1 billion won to suppliers facing a shortage of capital. HMC made an agreement with the Korea Credit Guarantee Fund and Industrial Bank of Korea to develop the Network Loan and provided loans with lower interest rates to suppliers based on recommendations by HMC.

Support for Information System and Joint Procurement | Our Vaatz (Value Advanced Automotive Trade Zone) system, an information sharing system, help suppliers improve their information system and share information on production planning and drawings with suppliers in real-time. The system uses its purchasing power to support suppliers to adopt joint procurement with an aim of reducing costs. Joint procurement amounted to 67.6 billion won in 2007 and is expected to reach 100 billion won in 2008. Also, joint procurement is expanded to include raw materials such as stainless steel as well as general supplies.

● Strengthening Global Competitiveness

Advance into Overseas Markets | We help our suppliers enter overseas markets based on HMC overseas plants. As of 2007, a total of 220 HMC suppliers operate in China, India, the U.S.A., and other countries. This is a win-win strategy, as we can procure parts from the global market in collaboration with suppliers, while our suppliers experience continuous growth and increase global competitiveness.

* Small and Medium Enterprises 88 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

Nurturing Global Human Resources | Our education programs continue to help employees of suppliers enhance competency and increase global competitiveness. In 2007, we built a vocational training consortium with suppliers to provide 32,000 employees of HMC suppliers with training courses on engineering and expertise on quality, technology, labor relations, security, and ethical management. In addition to educating 78 would-be CEOs of suppliers, we provided education courses to 58 employees of 37 suppliers working in overseas plants, and foreign language courses to 18 employees of 11 suppliers. In 2008, we plan to educate 32,000 employees of suppliers and provide training courses to suppliers of overseas plants and suppliers of suppliers.

Education programs to nurture global human resources Category Program Business management Educational courses for local suppliers of overseas plants (180 trainees) Quality Seminars by sector (for 3,500 trainees in 9 sectors, employees of suppliers of suppliers included) Managers of suppliers of suppliers Technology Professional engineering courses (expanded to include suppliers of suppliers) Increase in the number of cyber training programs (from 9 to 12 programs)

● Support for Secondary Suppliers

Management Support | Participating in joint procurement to help ease difficulties secondary suppliers face, HMC has induced suppliers to improve payment conditions for secondary suppliers. As a result, joint procurement increased from 2.5 billion won in 2006 to 13.4 billion won 2007, and 20 billion won is expected in 2008.

Nurturing Human Resources | It is not easy for secondary suppliers to improve their competitiveness because they lack the capacity to develop proprietary technology. For this reason, we have operated the Vocation Training Consortium to support secondary suppliers since 2006 and hosted the Management Innovation Seminar every two years. In 2008, we will encourage 1,000 secondary suppliers to participate in the seminar.

Quality Improvement | The SQ Certification is introduced to help secondary suppliers improve the quality of auto parts manufactured. In 2007, up to 3,054 secondary suppliers successfully obtained the SQ Certification. For a fair and objective assessment, we established the SQ Certification Assessment Center, which provided 24 education courses for a total of 521 SQ Certification evaluators. Starting from 2008, we plan to introduce a grading system to the SQ Certification. In 2007, the Quality Technology Volunteer Group guided 216 secondary suppliers to improve product quality and technology competitiveness. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 89

Ulsan Plant's Safety Programs for Suppliers

The Ulsan Plant recognized that safety accidents occurring in suppliers have affected the Ulsan Plant either directly or indirectly. We learned that the number of safety accidents increases, as the relative importance of suppliers increases. Moreover, the awareness has been raised that safety accidents among suppliers might be the source of labor disputes. In response to this, the Ulsan Plant has introduced the following programs to address safety and health issues of suppliers in advance.

1. Regular Safety Management Meeting HMC safety managers hold a monthly meeting with 138 suppliers from 13 regions for dealing with suppliers’ safety and health concerns. The Ulsan Plant has hosted not only regular meetings but also special meetings from time to time to improve safety and health, and develop measures to prevent safety accidents. We also has provided special safety education to presidents of suppliers.

2. Education on Safety and Health As part of our efforts to improve the quality of safety and health education, the Ulsan Plant developed an intranet system (iesh.hmc.co.kr) to provide 526 safety education courses and safety and health information to suppliers in real-time. The plant published and distributed a weekly magazine featuring safety management guidelines, safety common sense, and safety case studies. In addition to the publication, it produced videos and booklets on safety issues for suppliers.

3. Safety Promotion Events and Campaigns The Ulsan Plant designates the first Wednesday as Safety Day and the third Wednesday as Fire Safety Day in every month. The plant operates an emergency call center categorized into safety, health, fire safety, and the environment that receives any difficulties or safety concerns of the site. The Ulsan Plant has hosted the Safety Competition and operated outdoor electrical billboards to increase awareness of safety issues among suppliers.

1 Accident picture outdoor exhibition 2 Safety Promotion Competition 3 Outdoor electronic billboard for safety promotion

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78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

Support for Green Management of Suppliers

As a result of domestic and foreign environmental regulations’ rigidity, collaboration between HMC and our suppliers for sustainable development becomes more important. Green management and sustainable growth are also significant business issues for our suppliers. As an automobile requires more than 20,000 parts, it is not easy for the auto industry to form a single network that consists of auto manufacturers and parts suppliers to promote mutual collaboration and communication for sustainable growth. However, we recognize that a sustainable growth is only attainable when we collaborate with our suppliers. Based on the recognition that cooperation with suppliers is essential for sustainable growth, we introduced the Supply Chain Eco-Partnership (SCEP) to support suppliers to adopt green management practices.

● Supply Chain Eco-Partnership(SCEP) Pilot Projects The SCEP project launched in April 2006 is designed to transfer HMC green management prac- SCEP tices to suppliers. It is categorized into four areas of green management system introduction, hazardous materials management, process improvement, and energy consumption management, providing suppliers with the basis for environmental management. In addition, HMC has used the Supply Chain Environmental Management (SCEM) system to promote communication among suppliers and induce them to increase

Primary operational efficiency of green management practices. By introducing a self-diagnosis for hazardous mate- suppliers rials management, we further improved the SCEM system to help suppliers to benefit from the system.

SCEP schedule and participating suppliers Establishing green 1st year April 2006 ~ March 2007 partnerships 2nd year April 2007 ~ March 2008 Expanding Expanding Participating Suppliers Secondary Suppliers environmental network management suppliers Doowon Climate Control GE Sensing Korea, Youngbo Chemical, Lotte Aluminum, Sam-A Aluminum Sejong Industrial Chungwoo, Hyuunwoo MC, Hanyoung Industrial BorgWarner Transmission Dongwoo Heat Treating, Precision Secondary, tertiary Systems Korea suppliers Daesung Electric Jungwoo Plastic, IPL Hanil E-Hwa Sunil LOESS, Bumyang Industrial Donghee Industrial Seojin Precision IND., Shindo Engineering Denso PS Wooju Tech, Yu Shin Industrial

SCEM training for suppliers ● Green Management Transfer Model The SCEP project focuses on the Green Management Transfer Model. Based on the expertise obtained from the SCEM project launched in 2003, we have developed the Green Management Transfer Model, which clas- sifies suppliers into 18 categories, and transfer different green management practices to suppliers in each category. This model enables our company to classify suppliers by sector (parts and materials), size (large, medium, and small), and green management level (high, mid, low), and transfer customized green management practices to each supplier. The model helps suppliers improve green management practices themselves as it provides guidelines on green management. Now, we plan to expand the Green Management Transfer Model to all suppliers. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 91

Examples of green management practices transfer Category Supplier Area Outcome Suppliers BorgWarner Transmission Hazardous materials Replaced hazardous solvents with Systems Korea management water-soluble detergents Secondary Youngbo Chemical Waste recycling Increased waste recycling Suppliers Reduced incineration wastes

Tertiary Sam-A Aluminum Energy saving Reduced CO2 emissions and electricity Supplier consumption thanks to improved operation of the heating system

● Benchmarking Study on Japanese Companies In the SCEP project, we supported suppliers to conduct a benchmarking study on Japanese companies to help suppliers access to green management practices of advanced companies. The benchmarking study was conducted by 7 suppliers participating in the SCEP project and green management officers of HMC, who visited environmental organizations including the Eco Town in Kyushu, Japan.

● Support for Green Procurement* In September 2005, we voluntarily made an agreement on green procurement with the Min- istry of Environment. After declaring to purchase environment friendly products to promote sustainable consumption, in 2007, we spent 1.5723 trillion won in green procurement. This figure amounts to 8.2% of HMC's total procurement of 29.1 trillion won.

Green procurement by plant in Korea (unit: 100 million won)

Category 2006 2007 Number of items Amount Number of items Amount Products with the Certified Green Mark 58 111 87 113 Products with recycling marks (GR Mark) 10 277 9 440 Products with reduced hazardous materials 32 11,451 35 15,170 (lead/mercury/cadmium/chrome) Total 100 11,840 131 15,723

* Green procurement starts from purchasing goods that are necessary. It is about buying not only products of good price and quality but also environment-friendly goods that are less harmful to the environment and people. Green products include goods with the certified green marks, recycling marks (GR Mark), less hazardous materials, energy saving marks, and less wastes. 92 People & Society

78 Employees 85 Suppliers Shareholders and Investors 92 Shareholders and Investors 95 Customers 99 Social Contribution

On behalf of shareholders and investors, we make efforts to increase profitability with proactive and effective IR activities. We hold the Shareholders' Meeting and quarterly performance presentation in order to build trust and increase the level of shareholders and investors’ understanding of our activities. Participating in domestic and foreign investment conferences allowed us to offer investors information on HMC and discuss potential investment opportunities. Moreover, IR website provides investors with real-time investment information including financial statements.

Shareholders' Meeting and Dividend

We held the 40th Shareholders' Meeting on March 14, 2008 to receive an approval of the 2007 business performance, appointment of internal and external directors, and compensation ceiling for directors from the shareholders. Shareholders approved the re-appointment of Mong-koo Chung as the CEO in the 2008 Shareholders' Meeting, and our management plans to focus more on transparency and corporate social responsibility in 2008.

Matters submitted to the 2008 Shareholders' Meeting Category Item Matters submitted to the 1. Approval of the 40th (January 1, 2007 to December 31, 2007) Balance Sheet, Shareholders' Meeting Statement of Profit and Loss, and Surplus Appropriation Statement (draft) 2. Appointment of a director (internal) 3. Appointment of an external director who is to be a member of the Audit Committee 4. Ceiling on the compensation for directors Approval Approved as drafted

An auto manufacturer has to make continuous capital investment. Therefore, we determine the dividend, taking into account both investments for continuous growth and shareholder values. In 2007, the dividend rate was 20%, the same as that of in 2006. The dividend payout ratio decreased a little, compared to the ratio in 2006. However, in 2007, the dividend yield of common stocks maintained while the dividend yield of preferred stocks was higher than the yield in 2006.

Dividend by year (common stocks) Category 2005 2006 2007 Net profit (100 million won) 23,487 15,261 16,824 Dividend rate (%) 25.0 20.0 20.0 Total dividend (100 million won) 3,423 2,754 2,760 Dividend payout ratio (%) 14.6 18.0 16.4 Dividend yield (%) Common Stock 1.3 1.5 1.4 Preferred Stock 2.1 2.9 3.2 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 93

Stock Dividend for Employees

The Board of Directors of HMC approved to issue stock dividends to employees in September 2007, and offered 30 stock dividends to every employee in positions below the manager level in October 2007. The decision was made to celebrate the 40th anniversary and the 2007 collective wage agreement reached without a strike. As employees become shareholders, they have a common interest with investors.

More Effective Communication with Shareholders

Having published various reports including the Annual Report, Accounting and Audit Report, and Sustainability Report, we have been able to provide accurate information to shareholders and investors. Since 2004, we have opened the IR website to offer information on the company, finance, stocks, and sales in real-time and posted disclosure and investment conference information on the website.

IR website (Korean) http://ir.hyundai-motor.com IR website (English) http://ir.hyundai-motor.com/eng

● Overseas IR Activities We seek diversification of our investors and attract new investors by demonstrating our efforts for global management and growth potential through overseas IR activities. As part of our IR activities, we participated in major international auto conferences and investment conferences around the world. In 2007, we participated in an IR event held in the Middle East for the first time and attempted to diversify investors.

2007 Overseas IR activities Date Location Event January Detroit 2007 Detroit Auto Show Conference USA Overseas NDR* on earnings and business plans February Asia, Europe Overseas NDR on earnings and business plans March New York Woori Investment and Securities New York Investment Conference London Capital Research Conference Hong Kong Credit Suisse AIC Conference May Korea Conference call on the 1st quarter earnings (Headquarters) Hong Kong, Singapore KRX* Conference June Boston, New York, London 2007 UBS Best of Asia Conference August Korea 1:1 conference calls with overseas institutional investors (Headquarters) September Hong Kong CLSA Conference December Dubai DIC* Arab-Asian Investment Conference

* NDR: Non-Deal Road Show * KRX: Korea Exchange * DIC: Dubai International Capital 94 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

● Domestic IR Activities We engage in continuous IR activities to notify Korean institutional investors our earnings, strategies, and new products in order to increase investor confidence in HMC. We announce business plans and earnings forecast in the beginning of each year, and disclose earnings result in every quarter. After the announcement of earnings, we have Non Deal Road show (NDR) on a regular basis to clarify any inquires from investors and, and improve credibility of our earnings reports. In response to increasing popularity of fund investment among Korean investors and their rising influence on the Korean stock market, we occasionally hold other investment conferences for Korean institutional investors in the beginning of each year. We hosted seminars on major economic issues to meet the information needs of the market and to encourage the management’s participation in IR events to present HMC business plans. Moreover, we hosted exhibitions for our new cars to help investors experience the excellent quality and marketability of new products, and comparative test ride events to allow investors to check our efforts in cutting costs and develop environment-friendly vehicles.

2007 Domestic IR activities Date Venue Event January Korea Exchange Reporting on the 2006 earnings and 2007 business plans Seoul NDR for Korean institutional investors May Korea Exchange Reporting on the 1st quarter earnings Seoul NDR for Korean institutional investors Seoul Woori Investment and Securities IR event July Korea Exchange Reporting on the earnings in the first half of 2007 Seoul NDR for Korean Headquarters Headquarters New car releases (i30, Grand Starex) August Seoul Presentation on HMC's initiatives to cut costs October Korea Exchange Reporting on the 3rd quarter earnings November Seoul NDR for Korean institutional investors The Shilla Hotel UBS Korea Investment Conference COEX KRX IR EXPO December Namyang Hyundai-Kia Green Technology Seminar and Genesis Comparative Test Ride R&D Center People & Society 95

78 Employees 85 Suppliers Customers 92 Shareholders and Investors 95 Customers 99 Social Contribution

We advanced our mid- and long-term growth strategy from "Innovation for Customers" to "Customer First Management," which embodies our willingness to increase customer value in quality as well as in quantity terms by improving our brand image and product quality. "Cus- tomer First Management" has been applied in all business areas including R&D, production, sales, and maintenance.

Customer Satisfaction

● Customer Satisfaction in Korea We ranked first in both passenger cars and recreational vehicles (RVs) categories of the 2007 National Customer Satisfaction Index (NCSI) survey conducted by the Korea Productivity Center. The fact that we have maintained as the top in both categories for seven consecutive years implies that our customers recognize the high quality of our products and services. Meanwhile, our passenger cars ranked first for 14 consecutive years in the Korean Customer Satisfac- tion Index (KCSI) survey conducted by the Korea Management Association Consulting (KMAC). Our RVs remained as the top for four consecutive years, since when the RVs category was newly introduced to Ranked first in both passenger cars and RVs categories of the 2007 National Customer Satisfaction Index. KCSI in 2004.

● Customer Satisfaction Overseas Our products are well acknowledged even in overseas markets. For example, Azera ranked first for two consecutive years in the midsize and large car segments in the 2007 Automotive Performance, Execution and Layout (APEAL) Study conducted by the J.D. Power and Associates in the U.S., and won the AutoPacific Vehicle Satisfaction Award. We will develop products that maximize customer value, improve product quality and services, and enhance brand images, according to its mid- and long-term strategy of "Customer First Management."

Customer First Management

● Protection of Customer Information As personal data privacy becomes increasingly important and violations of privacy frequently occur, we make efforts to protect customer data and increase customer confidence. Especially, in accordance with the Regulations on Spam under the Information and Communications Act, we do not send advertising messages to customers, unless customers agree to receive such messages from HMC in advance. We also ensure that "opt-out" customers do not receive any marketing messages via DM(Direct Mail), e-mail, or text messages. 96 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

● Customer-Value Partnership We developed "Customer-Value Partnership" to become closer to customers and provide customers with advisory service of highest quality. While operating a cyber advisory service page on its website at (www.hyundai-motor.com), HMC provides one-stop service to address customer complaints in real-time using the integrated customer complaint call number of 080-600-6000. We improved the complex Interactive Voice Response (IVR) system to increase user convenience. HMC particularly adopted "Helper," an advisory service system, to help customers easily access information on vehicles. In the beginning of this year, we ranked first in the auto industry category of the 2008 Korean Service Qual- ity Index survey conducted by the Korea Management Association Consulting.

● Voice of Customers A cutting-edge Computer Telephony Integration (CTI) system has been introduced to swiftly respond to Voice of Customers (VOC). We designate Voice of Customer (VOC) Day every week to help employees share information on customer satisfaction and complaint cases to improve customer relationship management. With VOC Day, we swiftly address customer complaints and send a thank-you letter to customers who propose ways to improve customer service.

● One-Stop Service In 2007, we introduced multi-purpose service centers in Korea, where customers receive various auto-related services including maintenance, insurance, and vehicle purchasing. This attempt helped improve customer service, enhancing our brand images. http://www.hyundai-motor.com(domestic only)

● BLU Service We implemented BLU Service in April 2007, a premium membership service for HMC domestic customers. BLU Service members use their membership cards to receive comprehensive customer service including auto maintenance, integrated point service, lifestyle service, and personalized information.

● Before Service We introduced "Before Service" to provide proactive service to customers. With Before Ser- vice, HMC service engineers visit customers to offer car maintenance service before customers request it. In October 2006, we became the first Korean automaker to provide Before Service and introduced 13 additional Before Service Cars. Especially, we provided free preventive auto inspection to customers during traditional holidays and va- cation seasons. A customer survey found that the auto inspection demand increased during traditional holidays. In addition, six HMC service centers in remote areas offered local customers free auto inspection and consumable parts replacement. We notify “Before Service” schedules on our web page every week. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 97

● Special Free Inspection Service We offered special inspection service to customers in the regions affected by Typhoon Nari. We sent emergency maintenance service engineers to those affected regions, provided special inspection service using the network of the service after the sale, and discounted maintenance fee by 50% for cars submerged. HMC has dispatched emergency maintenance service engineers to regions affected by heavy rains and provided customers with free inspection service every year to ensure that customers suffering from natural disasters use vehicles safely. HMC also plans to continue to offer auto maintenance service and conduct auto safety campaigns.

Marketing

● Marketing Events Celebrating the 40th Anniversary 1 Emergency service 2 Customer Invitation event for the 40th anniversary of HMC In 2007, we hosted the ‘Big Love and Big Thanks’ Festival and various marketing and promotion events to celebrate the 40th anniversary, and conscientiously complied with marketing-related laws and regulations, making no marketing law violations.

● Auto-Prosumer Initiative HMC became the first Korean automaker to introduce the Auto-Prosumer Initiative, which re- flects customer opinions in the product or service development phases. When we developed i30 and selected the model name, we actively sought ideas from Auto-Prosumers in their 20s and 30s, who would be the main customers of i30. 1

● Marketing for Overseas Customers We invited 50 overseas customers to the Seoul Motor Show in April 2007 to introduce HMC models to overseas customers and expand the export market for our commercial vehicles. In October 2007, we invited buyers of Universe (a new bus model) around the world to the Asan Plant, and conducted various sales promotion activities to achieve the 2007 sales target. The HMC Commercial Vehicle Division has conducted constructive marketing campaigns by inviting overseas buyers to Korea once or twice a year.

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78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

HMC's Efforts to Ensure Customer Safety

As collision safety laws and regulations are becoming more intense, the role of the steering column is increasingly important. The steering column controls the direction of the rotation axis of the wheel and absorbs impacts of a collision, reducing shock transferred to the driver and passengers. Moreover, power steering contributes to lower emissions and higher fuel efficiency. Therefore, we began to develop the Motor Driven Power Steering (MDPS) unit in 2005.

The existing steering column causes many quality problems especially when motor weight over 5.5kg was installed. Steering column could not absorb the impacts of a collision. Thus, the existing steering column has limitations in protecting the driver. The MDPS unit offers more space for a motor since the overall length is 490mm, 150mm less than the exiting steering column. Also, it has an integrated mounting structure to efficiently withstand impacts of a collision.

Furthermore, we changed the existing shaft and tube connection for absorbing impacts of a collision into a sliding structure using spline, and inserted Telesco for driver convenience. The MDPS unit is different from the existing steering columns in structure and functions. It turns the existing support structure into a mounting structure, increasing the strength of the steering column. In particular, it decreases bending of the steering column, improving collision safety. The MDPS unit itself also absorbs the impacts of a collision and prevents car theft.

Since May 2007, we have applied the MDPS unit into i30 and plan to apply the MDPS unit to other compact cars, As the MDPS unit is expected to be mandatory for hybrid cars, we expect our MDPS units to replace imported items and prove our technological prowess in the global market. In April 2007, our MDPS unit was designated as the New Excellent Technology (NET) by the Ministry of Science and Technology and Korea Industrial Technology Association. People & Society 99

78 Employees 85 Suppliers Social Contribution 92 Shareholders and Investors 95 Customers 99 Social Contribution

Under the slogan of "Moving the World Together," we contributed to make the world a better place. In order to provide social welfare benefits to the disadvantaged, we have implemented Selected Social Welfare Projects for three years. As an automaker, we conducted the Easy Move campaign to improve mobility of physically disabled people, and the Safe Move campaign to promote safer traffic culture by leveraging the scale of our corporation in order to contribute to the society. Based on the recognition that social contribution can be more mean- ingful when all employees are involved, we have encouraged our employees to participate in various volunteer programs. We opened the global CSR website and established the Global CSR Network in 2007 to increase social contribution and fulfill its social responsibility.

Social Contribution Philosophy and Vision

● Social Contribution Philosophy With the management philosophy "Pursuing the Happiness of Humanity through Vehicles," we firmly believe in realizing the social contribution towards ‘happiness of humanity and a sustainable society’ by promoting environment-friendly practices and fulfilling our social responsibility as a leading automaker.

● Social Contribution Vision • Contribute to environment-friendly economic activities and preserves the environment. • Contribute to corporate citizen and assumption of social responsibilities • Contribute to the realization of a sustainable society, working with citizens. • Contribute to the realization of social values that achieve human dignity and happiness. • Contribute to immediate response to global social demands.

Progress and Plans

● 2007 Achievements

Global CSR Website | We opened the Global CSR Website to communicate HMC's global CRS activities and facilitate exchanges of information among CSR managers. The website is the first infrastructure for HMC's global CSR activities. The website offers information on various CSR activities conducted by HMC all around the world.

Global CSR Network | Since 2007, we have made a social contribution and fulfilled our social responsibility in earnest. Based on major overseas production and sales bases, we have established the Global CSR Network and plan to expand the network to include all HMC offices and plants around the world.

HMC Global CSR Website http://csr.hyundai-motor.com 100 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

Global CSR Network HMGC

HAOS BHMC Asan Ulsan Plant Plant

Korea Jeonju Korea Headquarters -domestic HMI Plant -domestic sales HMC

Namyang Service Hyundai-Kia after R&D Center the sale HMMA HME

HMA

Deepening of Domestic Social Contribution Programs | In 2007, we reinforced our existing public campaigns, community volunteer programs, and social contribution activities in Korea. We especially focused on volunteer programs at the community level including "the One Company Sponsor for One Rural Village Initiative," HMC volunteer groups, and House Maintenance Volunteer Group.

● 2008 Plans

Global CSR Programs | All HMC offices and plants across the world support CSR activities under the Global CRS Programs. Each office and plant focuses on CSR programs at the community level under the Global CSR Programs with Regional Focus.

Global CSR Network Expansion | We plan to expand the Global CSR Network from our eight domestic and overseas Hyundai Motor Companies to include all major production and sales bases and regional headquarters by 2009. The Global CSR Network will promote internal communication at the company level and help us effectively develop CSR policies and programs for the company.

Advanced Volunteer Programs | We recognized company should not only make donations but also participate in various volunteer programs in order to become a responsible corporate citizen. Over the past few years, we have continuously improved our volunteer programs in Korea. Now we are planning to conduct global CSR activities in earnest starting 2008. To this end, we will grant awards and prizes to employees who contribute to CSR programs, develop education courses for CSR managers, and create volunteer programs that can be universally applied to all offices and plants of HMC across the world. We plan to effectively link volunteer programs at the community level to its global CSR programs. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 101

Social Contribution Activities in Korea

● Focus Projects

Selected Social Welfare Projects | Since 2005, we have carried out Selected Social Welfare Projects to increase our expertise and knowledge on social welfare projects. Through the projects, HMC has not only donated money but also provided social welfare benefits to the disadvantaged. In 2007, we have selected a total of 26 social welfare organizations and donated 300 million won (approximately $300,000) to them. 1 | 4 Traffic safety campaign for children The social welfare projects selected in 2007 were "the Family No.1 Project" for families with children with 2 | 3 Grand Starex for Easy Move serious disabilities and "the Small Library Project" for children without access to a library.

Projects by beneficiary Year People with The elderly Children and Others Total Amount disabilities adolescents 2005 6 6 6 4 22 projects 300 million won 2006 7 6 6 - 19 projects 300 million won 2007 11 7 8 - 26 projects 300 million won Total 24 19 20 4 67 projects 900 million won 1

Safe Move | As a leading automaker and responsible corporate citizen, HMC has conducted the Safe Move Campaign to create a world, where children play outside without any safety concern. Since 2005, we started to operate the “Search for a Three-leaf Clover” program to grant the wish of children from families affected by car accidents. In 2007, HMC provided grants to 77 children whose family suffered from car accident. In January 2008, we invited 52 children with the same reason to the Three-leaf Clover Camp that offered various cultural events for children. 2 Since 2003, we conducted a traffic safety campaign for children in collaboration with the Citizen's Coalition for Safety. Particularly in 2007, HMC introduced "No No Story," a musical for children, to help children learn about traffic safety in easy words.

Easy Move | With the Easy Move Campaign, we helped the disadvantaged including people with disabilities, elderly, and pregnant women easily move using its vehicles. In July 2007, we disclosed the Grand Starex Easy Move Vehicle, which was equipped with an electric wheelchair lift and manual wheelchair slope to help people with disabilities get on the vehicle without getting off their wheelchair. 3 102 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

Progress in the development of Easy Move Vehicles Year Description April 2005 Disclosed the Easy Move Vehicles at the Seoul Motor Show August 2005 Provided a test ride of the Easy Move Vehicles in collaboration with the National Assembly Spe- cial Commission on People with Disabilities July 2006 Conducted a quality test on the Easy Move Vehicles by people with disabilities September 2006 Released and operated the Starex, Lotze, and Grand Carnival Easy Move Vehicles July 2007 Released the Grand Starex Easy Move Vehicle 1

In August 2007, HMC donated 500 million won (approximately $500,000) to the Korea Differently Disabled Federation to help the federation build facilities for safe movement in 84 organizations for people with disabilities across the country. From May to December 2007, HMC supported five social welfare facilities for people with disabilities to open Ai Maru, a playground, where children with disabilities can play without safety concerns. In addition, in April 2007, HMC provided prosthetic legs and special shoes to people with disabilities, and invited 300 members of the Amputee Coalition of Seoul to plant tours. The Ulsan Plant in-

2 vited the blind to "Beautiful Journey with People with Disabilities," and 1,004 employees and their families 1 Ai Maru, an indoor playground for children with disabilities volunteered to help guide the blind. 2 Balloon event on the beach for the Beautiful Journey with People with Disabilities ● Volunteer Groups There are 115 volunteer groups at the HMC headquarters, plants, and R&D centers. Each of 115 HMC volunteer groups has alliance relations with a social welfare organization and makes a social contribution with regular volunteering activities. They provide the disadvantaged with car maintenance service and field trips to a HMC plant or R&D center.

Structure of HMC volunteer groups

Led by the General Affairs HMC volunteer groups Team at the Headquarters

16 groups 22 groups 3 groups 4 groups 14 groups in 31 groups 25 groups at the in the in the in the the Hyundai-Kia in domestic in service after Headquarters Ulsan Plant Asan Plant Jeonju Plant R&D Center sales the sale

Monthly volunteering activities based on sister relations with social welfare organizations and regions HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 103

HMC Volunteer Program | HMC volunteer groups visit social welfare organizations in alliance relations Three major volunteering activities more than once a month. They have made a social contribution by not only serving service to the disadvantaged but also identifying what the disadvantaged needs most.

HMC Volunteering activities volunteer program Year Number of Number of Number of Time volunteers volunteer groups visits 2005 12,755 106 1,017 51,620 hours 2006 15,136 112 1,372 60,556 hours One Company 2007 18,442 115 1,314 92,210 hours House Sponsor for maintenance One Rural Village Initiative House Maintenance | HMC employees and their families have replaced wallpaper, floor paper, and old facilities in houses for the disadvantaged. From September to December 2007, a total of 1,777 volunteers participated in the house maintenance service to repair 102 houses. In 2008, HMC expects the number of repaired houses to reach 776.

One Company Sponsor for One Rural Village Initiative | HMC has promoted the One Company Sponsor for One Rural Village Initiative. Since 2007, our volunteers helped farmers in 69 rural villages in alliance relations during the farming season, and inspected vehicles and farm machines in those villages more than twice a year. Also, in order to help farmers increase income, we encouraged employees to buy agricultural produce directly from farmers, and operated farmers' markets both on-line and off-line. In 2007, we spent 3

1 Helping farmers plant rice in rural villages in sister relations billion won (approximately $3 million) in aiding rural villages directly or indirectly. HMC won the Presidential 2 Quality Division’s volunteering to help distribute meals at the Silver Award for Urban-Rural Exchanges for its efforts to promote urban-rural exchanges. Nursing Home

Volunteering activities by division Division Villages in Number of Activities sister relations villages Headquarters Wulwun-ri, Hongcheon-gun, 1 Helping farmers and building village Kangwon-do lavatories, etc. Ulsan 11 villages including the Yangam Village 12 Purchasing Korean agricultural produce Asan Sare-1-gu, Yeosan, Chungnam 1 Maintenance of the community center

1 and the senior center, etc. Jeonju 3 villages including the Surak Village 4 Farmers' market celebrating the 40th anniversary Hyundai-Kia Onseok-2-dong, Whasung-si, 1 Volume food purchasing, etc. R&D Center Gyunggi-do Domestic sales 24 villages including Ogum-ri, Paju-si 25 Helping farmers for two days and one night Service after 24 villages including Juwul-ri, Paju-si 25 Car inspection, on-line farmers' market, etc. the sale Total 69

3 104 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

Volunteering Activities to Help TaeAn Recover from the Worst Oil Spill in Korean History

On December 7, 2007, a crane barge collided with an anchored crude carrier on the Yellow Sea of Korea, resulting in the worst oil spill in Korean history. The amount of oil leaked was 12,547kℓ, which was more than the combined amount of oil spilt from ships over the past decade in Korea. Also, it was the largest oil spill in the world in 2007.

The catastrophic oil spill destroyed the fishing ground and seriously affected the livelihood of fishers and residents in TaeAn. The incident also destroyed the TaeAn National Sea Park, which has beautiful natural landscape including the foreshore, coastal land dunes, and sunset, and is a rich fishing ground and home to 2,500 species of fauna and flora.

More than 1 million volunteers visited TaeAn to help local fishers recover from the oil spill and prevent further environment destruction. HMC employees also volunteered to help the region recover from the worst oil spill and minimize the environmental damage. HMC built the base camp on the beach named Yoihang-ri in TaeAn, and invited volunteers to remove oil from the beach. We purchased all tools needed for oil removal including absorbing cloth, oil-proof suits, masks, water, and food in advance in order to minimize the burden on local residents. We also collected used clothes that could be used as alterna- tives to non-woven fabric or absorbing cloth during oil removal. Volunteers did their best to remove oil from the beach, as they recognized that oil removal in the early phases was critical.

HMC has hosted the Green Art Competition for Children and engaged in environment clean-up activities at the community level. After the worst oil spill disaster in TaeAn, HMC has re-examined its corporate social responsibility to protect the environment. HMC plans to do its best to create a world, where humanity and nature peacefully coexist, by encouraging its employees to participate in volunteering activities as well as increasing corporate donations.

1 | 2 Employees in the Asan Plant volunteered to help remove oil in TaeAn 3 Employees in the Jeonju Plant sent used clothes to help remove oil from the beach in TaeAn

1 2 3 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 105

Global Social Contribution

Social contribution symbols and slogans by language

korean english chinese

● HMI's Social Contribution Since HMC first entered the Indian market, HMI (Hyundai Motor India) has continued to grow. 1 Desks and chairs donated to schools in Thandalam by the Hyundai HMI became the second largest automaker in India in terms of market share, the largest auto exporter in Motor Foundation(HMI) 2 Invitation of students from the disadvantaged families in the com- India, and became the largest investor in Tamil Nadu. HMI has decided to contribute to the Indian society munity where the India Plant is located(HMI) based on its success. Therefore, on April 10, 2006, HMI founded the Hyundai Motor India Foundation 3 Volunteering to enhance traffic safety in congested downtown (HMIF). areas(HMI) Whenever HMI sells a car in India, we donate 100 rupees to the HMIF. The donation fund is used for new social contribution projects and activities in India.

Contribution at the Community Level | Since March 2007, HMI has selected students in need of financial aids as Traffic Safety Campaigners and granted them scholarships. The Traffic Safety Campaigners serve as safety campaigners in congested areas of Chennai and Deli to help pedestrians and motorists recognize the importance of traffic safety.

1 The HMIF also held the Medical Camp to provide free medical service to local residents. Medical profession- als of the Saveetha Medical College participated in three rounds of the Medical Camp to provide free medical service to 1,600 residents in villages close to HMI including Irrungattukottai, Thandalam, and Poonamali. In June 2007, HMI provided road maintenance, facilities repair, and medical device grants to the State Hospital in Kanchipuram, where HMI site is located. In January 2008, HMI donated a Tucson to an environment campaign with a theme of prevention of global climate change held on the Marina Beach.

Scholarships | The HMIF has donated desks, chairs, and education tools manufactured by HMI to primary, 2 middle, and high schools in Thandalam on a regular basis. In 2007, we granted 3,000 sets of desks and chairs to six schools in the region. We are planning the number of desk-chair sets to reach 10,000 by early 2008. The donation helped HMI get closer to local residents. It is also environment-friendly, as wood from auto parts packaging is re-used to make desks and chairs. In June 2007, HMI provided education materials, facilities maintenance, scholarships, and employment opportunities to the Department of Automotive Engineering of the Assam Technical High School. Since February 5, 2008, HMI has invited students in need of financial aids to the plant nine times. We invited a total of 1,570 students to the plant to provide them with breakfast at the plant cafeteria, a plant tour, and 3 excursion to a nearby park. 106 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

● HMA's Social Contribution

Hope on Wheels (HOW) | Since 1998, Hyundai Motor America (HMA) and the dealers have donated to medical studies on pediatric cancers. Since 2004, we have donated more than 9 million dollars to 70 pediatric cancer research centers in the name of the Hope on Wheels (HOW), and have cooperated with community organizations to increase public awareness about pediatric cancers. All HMA dealers in the U.S. have agreed to donate four dollars to HOW, whenever they sell a Hyundai car. In 2007, HOW visited 30 organizations in 29 cities, and donated 1.35 million dollars and six Santa Fes (produced in 2007). HMA is the largest donator in the American auto industry for pediatric cancer research,

1 improving the image of Hyundai Motor in the American market.

Dana-Farber Boston Marathon Jimmy Fund Walk | The Dana-Farber Cancer Institute is one of the leading pediatric cancer research institutes in the U.S. Since 1998, HMA has cooperated with the Dana- Farber Cancer Institute to support the Jimmy Fund Walk. Every year, more than 7,000 people participate in

2 the Jimmy Fund Walk and walk 26.2 miles to raise fund for pediatric cancer research and increase public awareness of pediatric cancers. HMC and dealers in the U.K. have also donated more than 6.30 million dollars to the Dana-Farber Jimmy Fund over the past six years. In 2007, they donated 400,000 dollars to 2 1 Events in the Sun Village, a childcare center for children of inmates the Dana-Farber Cancer Institute. on death row 2 Donation of vehicles to the Olympics Volunteers Group in Shunyi DARE Program– Long Beach Police Department | HMA donated two vehicles to the DARE Program of District, Beijing the Long Beach Police Department in the U.S. The Drug Abuse Resistance Education (DARE) Program is a drug prevention program, where policemen teach children how to reject drugs, delinquency, and violence. The vehicles donated by HMA are now used for various education programs on Long Beach Island.

● BHMC's Social Contribution

Vehicle Donation to the Olympics Volunteers Group in Shunyi District, Beijing | In July 2007, BHMC had a vehicle donation ceremony in the Shunyi Hotel to contribute vehicles to the Olympics Volunteers Group in Shunyi District, Beijing. Shunyi District is the very center of the manufacturing industry and auto industry in Beijing. BHMC has played a leading role in developing the manufacturing industry in Beijing and contributed to growth of the Shunyi economy. In addition, BHMC has actively participated in social contribution projects, setting an example as a model company that grows together with the local community.

Social Contribution at the Community Level | In September 2007, Beijing-Hyundai Motor Company (BHMC) donated 110 PCs to the Sun Village Children Center, a non-profit organization to take care of children of prisoners currently serving sentences, and contributed 11 finished cars, 180 engines, 50 transmissions, and other 1,000 auto parts to education facilities in order to help students from the disadvantaged families and remote areas receive better education. This was the largest social contribution event since the foundation of BHMC. HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 107

● Global Social Contribution Activities

Assistance for Disaster Recovery in Greece and Peru | HMC has provided various aids to countries hit by natural disasters such as a tsunami or earthquake to help affected people recover from the disaster, with an aim of contributing to the wellbeing of humanity. For example, we donated 200,000 euros to the Greek government, when Greece had a series of wild fires in 2007. We also provided Peru with special free maintenance service worth 100,000 dollars for cars affected by an earthquake. We inspected vehicles and replaced parts in the affected regions, regardless of car models or brands.

Donation of 200,000 euros for the recovery from the wild fire in Greece Aids for the Lower Classes in India | HMC has conducted social contribution activities at the community level in India. In particular, we helped the untouchable caste get education to be economically independent, and aided the operation of the Sujata Academy, a school for the untouchable caste in Dhaneshari in northern India. In January 2008, HMC had a groundbreaking ceremony in collaboration with the Com- munity Chest of Korea and Joint Together Society Korea to build additional classrooms and a dormitory in the Sujata Academy.

To Become an Automaker that Contributes to the Public Interest

Sridar K, Deputy Manager, Hyundai Motor Foundation, HMI

Since the foundation, HMI has made a success in the Indian market. HMI has the second largest market share, and becomes the largest auto exporter in India and largest investor in the State of Tamil Nadu. HMI attributes its success to longstanding trust and support from the Indian public. Therefore, HMI has made efforts to give what it has earned back to the society based on the recognition that a business is sustainable only when it gives back its profits to the society, HMI aims not only to raise fund for public welfare but also to promote the development of civil society in its real meaning. To this end, HMI has encouraged employees to use their time, knowledge, experience, and energy for the public interest. I believe that the greatest happiness comes from giving what I have to others, not from possessing money or wealth. The most memorable contribution of HMI was to donate desks and chairs to nearby schools. Students in nearby schools had to sit down on the floor because they had no desks and chairs. However, 1,300 students now sit on the chair and before the desk with HMI logos. I was deeply touched by the students who had a big smile and studying hard. In order to help students who will lead India in the future focus on learning, HMI plans to donate a total of 7,000 pieces of chairs and desks to local schools. 108 People & Society

78 Employees 85 Suppliers 92 Shareholders and Investors 95 Customers 99 Social Contribution

2007 Global Social Contribution Activities Subsidiary Country Program Content

Hyundai Motor America(HMA) United States Hope On Wheels ㆍsupported child cancer movement Hyundai Scholars Pediatric Cancer Fellowship Program ㆍprovided financial support for children who survived through cancer Dana-Farber Boston Marathon Jimmy Fund Walk ㆍdonated vehicles and fund to Dana-Farber Boston Marathon sponsor (fund& vehicles donation)

National Association for the Advancement of Colored ㆍsupported National Association for the Advancement of Colored People (NAACP) ㆍPeople (NAACP) Louis Barajas Hispanic Book Tour ㆍsupported Hispanic society through partnerships and activities of celebrities Habitat for Humanity ㆍvolunteered in building "Love House" for low-income family DARE Program – Long Beach Police Department ㆍdonated vehicles for the prevention of children's drugs taking and violence Fountain Valley Educational Foundation ㆍprovided scholarship for the implementation of culture and art Mother’s Against Drunk Drivers (MADD) ㆍaided Mother Against Drunk Driving (MADD) in the United States Soccer for Hope ㆍdonated soccer supplies to African children Hyundai Motor Europe(HME) Greece Greece forest fires relief support project ㆍfunded 20,000 euro for the fire rescue Hyundai Motor India(HMI) India Sujata Academy support project ㆍprovided financial support for low-income schools in India Local school support project ㆍdesks&chairs to local schools - expect a total of 10,000 sets ㆍsupported field trips of local school students ㆍgave gifts to students in memory of Independence Day ㆍrenovated Thandalam school ㆍprovided equipments for ITI automobile technology at Assam institute Korean culture exchange & cultural art area support ㆍopened Chennai InKo Centre and helped its operations ㆍsupported various cultural art festivals

1 Traffic Safety Campaigners of HMI 2 Habitat for Humanity program of HMMA 1 2 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 109

2007 Global Social Contribution Activities Subsidiary Country Program Content

Hyundai Assan Otomotive Turkey Hyundai Torches ㆍscholarship program Sanayi(HAOS)

Beijing Hyundai Motor Company China Computer donation to “Sun Town” ㆍdonated 110 computers to rescue research center (BHMC) & Vehicles & spare parts donations to educational institutes ㆍdonated11 vehicles, 180 engines, 50 transmissions, and 1,000 other parts Hyundai Motor Group China ㆍto Beijing University of Technology, Beijing Union University, and etc. (HMGC) Vehicles donation to Shunyi District Olympic Volunteer ㆍdonated 5 Tucsons Council

Donation of equipments for educational purposes at Iljo ㆍdonated 343 parts in 64 categories including 2 vehicles City Hyundai Motors Technology Institute ㆍdonated 40 Hyundai/Kia vehicles Hee Ah Lee's piano recital support ㆍdonated 50,000 yuan for social events China snowfall damage support ㆍdonated Tucson for restoring damages of snowfall and 1,000,000 yuan Central & Eastern. Europe Ukraine Orphans Drawing Competition Regional Headquarters Azerbaijan Traffic safety campaign Orphanage support Safe driving campaign Cultural activities sponsorship

Middle East Regional Oman Hyundai’s Al Mostaqbal Al Moshirique Awards ㆍgranted yearly awards such as computers for students with Headquarters ㆍacademic excellence Hyundai Motor Deutschland South Africa Harry Gwala Secondary School support project ㆍconstructed school facilities and provided security services GMBH ㆍplan to construct a student Gym in 2008 Africa Regional Headquarters South Africa Sports sponsorship ㆍagreed on the management of Soweto (residency densely populated with ㆍnatives) soccer stadium with Saudi Arabia Football Association Hyundai Motors Latin America Chile "SanHak Network" support ㆍdonated technology materials to support local schools Peru Peru earthquake restoration-related support ㆍconducted restoration activities in cities with earthquake damages ㆍ(for 2 weeks starting October 22nd) ㆍdonated supplies : water, food (2000 units), blanket (3000), automobile ㆍparts (windshield wiper, oil, etc.) Peru local educational institutes support ㆍsupporting organization: National Educational Organization that operates ㆍ45 industrial schools ㆍspecification of donation: engine & 13 T/Ms Asia & Pacific Regional New Zealand Child Cancer Foundation ㆍdonated vehicles to organization fund-raising for child cancer Headquarters Pinnacle Program ㆍprovided sponsor program to nurture child with athletic talents Singapore Fund-raising of Singapore Agency owned professional football club for disabled/ heart disease children 110 Appendix

Appendix

111 GRI Index

115 Independent Assurance Statement

116 Data Sheet

117 Index(Sheet & Graph)

118 Hyundai Motor Company Worldwide

120 Reference Material HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 111

GRI Index

Profile Reference Strategy and 1.1 Statement from senior decisionmaker about the relevance of sustainability to the organization 9 1.2 Description of key impacts, risks, and opportunities 10, 12, 13, 16, 17 Organizational 2.1 Name of the organization 119 Profile 2.2 Primary brands, products, and services 119 2.3 Operational structure of the organization 118, 119 2.4 Location of organization’s headquarters 119 2.5 Number and names of countries where the organization operates 118, 119 2.6 Nature of ownership and legal form 27, 28 2.7 Markets served 15, 34, 35 2.8 Scale of the reporting organization 15 2.9 Significant changes during the reporting period 14, 26, 35 2.10 Awards received in the reporting period 14, 103 Report Report Profile 3.1 Reporting period for information provided 0 Parameters 3.2 Date of most recent previous report 0 3.3 Reporting cycle 0 3.4 Contact point for questions regarding the report or its contents 121 Report Scope 3.5 Process for defining report content 0 and Boundary 3.6 Boundary of the report 0 3.7 State any specific limitations on the scope or boundary of the report 0 3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities 3.9 Data measurement techniques and the bases of calculations 3.10 Explanation of any re-statements of information provided in earlier reports 3.11 Significant changes from previous reporting periods GRI Content 3.12 Table identifying the location of the Standard Disclosures in the report 111-114 Index Assurance 3.13 Policy and current practice with regard to seeking external assurance Governance, Governance 4.1 Governance structure of the organization 28 Commitments, 4.2 Whether the Chair of the highest governance body is also an executive 28 and Engagement 4.3 State the number of members of the highest governance body 28 4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest 24, 25 governance body 4.5 Linkage between compensation for members of the upper management 4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided 4.7 Process for determining the qualifications and expertise of the members of the highest governance body 112 Appendix

Profile Reference 4.8 Internally developed statements of mission and principles 20, 21 4.9 Procedures of the highest governance body for overseeing the management of economic, environmental, and social performance 4.10 Processes for evaluating the highest governance body’s own performance Commitments 4.11 Explanation of whether and how principle is addressed to external 20, 21, 84 to external 4.12 Externally developed charters to which the organization subscribes 0 initiatives 4.13 Memberships in associations or International/international advocacy organizations 44 Stakeholder 4.14 List of stakeholder groups engaged by the organization 13 Engagement 4.15 Basis for identification and selection of stakeholders with whom to engage 13 4.16 Approaches to stakeholder engagement, including frequency of engagement 78-83, 86-88, 92-94, 95-97, 102-103 4.17 Key concerns that have been raised through stakeholder engagement 16, 17, 78-106 Economy Management 5.1 Management Approach and Performance Indicators 20, 21 Approach Economic EC1 Core Direct economic value generated and distributed 92, 102, 103, 119 Performance EC2 Core Financial implications for the organization’s activities due to climate change 44-57 EC3 Core Coverage of the organization’s defined benefit plan obligations EC4 Core Significant financial assistance received from government Market Presence EC5 Add Range of ratios of standard entry level wage compared to local minimum wage EC6 Core Policy, practices, and proportion of spending on locally-based suppliers 34, 35, 88 EC7 Core Procedures for local hiring and proportion of local senior management 78-81 Indirect Economic EC8 Core Development and impact of infrastructure investments and services provided 99-109 Impacts EC9 Add Understanding and describing significant indirect economic impacts 78, 88-91, 101-104 Environmental Management 5.2 Management Approach and Performance Indicators 22, 23 Approach Materials EN1 Core Materials used by weight or volume 64 EN2 Core Percentage of materials used that are recycled input materials 58-62 Energy EN3 Core Direct energy consumption by primary energy source 66 EN4 Core Indirect energy consumption by primary source 66 EN5 Add Energy saved due to conservation and efficiency improvements 67 EN6 Add Reductions in energy requirement as a result of energy-efficient or renewable energy initiatives 44-53 EN7 Add Initiatives to reduce indirect energy consumption and reductions achieved 65-68 Water EN8 Core Total water withdrawal by source 69 EN9 Add Water sources significantly affected by withdrawal of water 69 EN10 Add Percentage and total volume of water recycled and reused 69 HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 113

Profile Reference Biodiversity EN11 Core Location and size of areas of high biodiversity value EN12 Core Description of significant impacts of activities on biodiversity EN13 Add Habitats protected or restored EN14 Add Strategies, current actions, and future plans for managing impacts on biodiversity EN15 Add Number of IUCN Red List species and national conservation list species 67 Emissions, EN16 Core Total direct and indirect greenhouse gas emissions by weight 67 Effluents EN17 Core Other relevant indirect greenhouse gas emissions by weight 44-46, 55-57, 65-68 and Waste EN18 Add Initiatives to reduce greenhouse gas emissions and reductions achieved 72, 73 EN19 Core Emissions of ozone-depleting substances by weight 69, 70 EN20 Core NOx, SOx, and other significant air emissions by type and weight 71 EN21 Core Total water discharge by quality and destination 68 EN22 Core Total weight of waste by type and disposal method EN23 Core Total number and volume of significant spills EN24 Add Weight of exported, imported, transported, or treated hazardous under the terms of Basel Convention Annex EN25 Add Identity, size, and protected status of water bodies and related habitats 44-59 Products and EN26 Core Initiatives to mitigate environmental impacts of products and services 58-60 Services EN27 Core Percentage of products sold and their packaging materials Compliance EN28 Core Monetary value of significant fines noncompliance with environmental regulations Transport EN29 Add Significant environmental impacts of transporting products and other goods Overall EN30 Add Total environmental protection expenditures and investments 73 Society Management 5.3 Management Approach and Performance Indicators 20, 21, 24, 26, 27, 99, 100, Approach 105 Labor Employment LA1 Core Total workforce by employment type, employment contract, and region 78, 79 Practices LA2 Core Total number and rate of employee turnover by age group, gender, and region and Decent LA3 Add Benefits provided to full-time employees Work Labor/ LA4 Core Percentage of employees covered by collective bargaining agreements 79 Management LA5 Core Minimum notice period(s) regarding operational changes Relations Occupational LA6 Add Percentage of total workforce represented in formal joint management-worker health and safety committees 84 Health and LA7 Core Rates of injury, occupational diseases, lost days, absenteeism, and fatalities 84 Safety LA8 Core Programs to assist workforce members, their families, or community members regarding serious diseases 82-84 LA9 Add Health and safety topics covered in formal agreements with trade unions 83, 84 Training and LA10 Core Average hours of training per year per employee 81 Education LA11 Add Programs for skills management and lifelong learning 81, 82 LA12 Add Percentage of employees receiving regular performance and career development reviews 81 114 Appendix

Profile Reference Diversity and LA13 Core Composition of governance bodies and breakdown of employees per category 28, 29, 78, 79 Equal Opportunity LA14 Core Ratio of basic salary of men to women by employee category Human Investment and HR1 Core Percentage and total number of significant investment agreements that include human rights clauses Rights Procurement HR2 Core Percentage of significant stakeholders that have undergone screening on human rights and actions taken Practices HR3 Add Total hours of employee training on policies/procedures in aspects of human rights 80, 81 Non- HR4 Core Total number of incidents of discrimination and actions taken 80 Discrimination Freedom of HR5 Core Operations identified in which the right to exercise freedom of association and collective bargaining 80 Association and collective bargaining Child Labor HR6 Core Operations identified as having risk for incidents of child labor and actions taken 81 Forced and HR7 Core Operations identified as having risk for incidents of forced or labor and actions taken 81 Compulsory Labor Security Practices HR8 Add Percentage of security personnel trained in the organization’s policies or procedures Indigenous Rights HR9 Add Total number of violations involving rights of indigenous people and actions taken Society Community SO1 Core Effectiveness of any programs/practices that manage the impacts of operations 99-109 Corruption SO2 Core Total number of business units analyzed for risks related to corruption 24, 25 SO3 Core Percentage of employees trained in organization’s anti-corruption policies 25 SO4 Core Actions taken in response to incidents of corruption 25 Public Policy SO5 Core Public policy positions and participation in public policy development and lobbying 68, 90, 91 SO6 Add Total value of financial and in-kind contributions to political parties or related institutions Anti-Competitive SO7 Add Total number of legal actions for anticompetitive behavior, anti-trust, and monopoly Behavior Compliance SO8 Core Monetary value of significant fines for noncompliance with regulations Product Customer Health PR1 Core Public or voluntary policies for customer health and safety 95-98 Responsibility and Safety PR2 Add Total number of non-compliance incidents with regulations concerning health and safety 25 Product and PR3 Core Type of product and service information required by procedures 95-98 Service Labeling PR4 Add Total number of non-compliance incidents with regulations concerning products and services 25 PR5 Add Practices related to customer satisfaction including survey results on satisfaction 35, 36, 37, 95, 96 Marketing PR6 Core Programs for adherence to standards and voluntary codes related to marketing communications 25 Communications PR7 Add Total number of non-compliance with regulations concerning marketing communications 25, 97 Customer Privacy PR8 Add Total number of substantiated complaints regarding customer privacy and data losses 25 Compliance PR9 Core Monetary value of significant fines for non-compliance with laws concerning the provision and use of products and services HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 115

Independent Assurance Statement

Independent Assurance Statement to Hyundai Motor Company Management

We have reviewed environment and social aspects of the Hyundai Motor Company 2008 Sustainability Report (hereinafter, ‘the Report’). The Report is the responsibility of and has been approved by the management of the Company. Our responsibility is to draw a conclusion based on our review.

We have based our work on emerging best practices and standards for independent assurance on sustainability reporting, including the international standard ISAE 3000 “Assurance Engagements other than Audits and Reviews of Historical Financial Information”, issued by the Interna- tional Auditing and Assurance Standards Board. The objective and scope of the engagement were agreed with the management of the Company and included those subject matters on which we have concluded below.

Based on an assessment of materiality and risks, our work included analytical procedures and interviews as well as a review on a sample basis of evidence supporting the subject matters. We have performed interviews with management responsible for environment, health & safety and social responsibility at corporate level, as well as at the three domestic manufacturing plants.

We believe that our work provides an appropriate basis for us to conclude with a limited level of assurance on the subject matters. In such an engagement, less assurance is obtained than would be the case had an audit-level engagement been performed.

Conclusions

In conclusion, in all material respects, nothing has come to our attention that causes us not to believe that:

1. Hyundai Motor Company has applied detailed and systematic methodologies and processes for the preparation of the Report, as described in the section ‘Before you read’, in order to achieve its reporting objective. 2. Hyundai Motor Company at Headquarters level has applied detailed procedures to identify, collect, compile and validate data for 2007. Data for 2007 on Environment Management (page 42-75), Industrial Safety and Health (pages 83-84) and Social Responsibility (pages 76-109) is consistent with data accumulated as a result of these procedures and appropriately reflected the Report. 3. Data for 2007 for Hyundai Motor Company domestic production plants has reported according to the procedures noted in item 2 above and is consistent with source documentation presented to us.

Copenhagen, July 30, 2008 Seoul, July 30, 2008 DELOITTE Statsautoriseret Revisionsaktieselskab DELOITTE Korea

Preben J. Soerensen Jae Sool Lee Danish State Authorized Public Accountant Managing Partner Environment & Sustainability Services 116 Appendix

Data Sheet

(ton) (ton) Quantity of air pollutants discharged 200 200

(domestic) 150 150

100 99 100 68 67 50 50 28 6 -

2005 2006 2007 2005 2006 2007 □ Quantity of air pollutant discharged (SOx) □ Quantity of air pollutant discharged (CO)

(ton) (ton) 1,200 100 1,000 940 80 800 712 633 600 60

400 45 40 36 200 - - 2005 2006 2007 2005 2006 2007 □ Quantity of air pollutant discharged (PM) □ Quantity of air pollutant discharged (NOx)

(ton) 57.67 58.28 (kg/vehicle) (ton) (kg/vehicle) Water pollutants generated(domestic) 31.59 150 55 120 30

100 23.09 25 120 47.26 50 97 99 80 20 90 45 16.57 76 60 53 15 60 40 40 39 10 27 30 35 20 5

2005 2006 2007 2005 2006 2007 □ Quantity of water pollutants generated (COD) □ Quantity of water pollutants generated(BOD) ● Generated quantity by vehicle (g/vehicle) ● Generated quantity by vehicle (g/vehicle) (ton) (kg/vehicle) (ton) (kg/vehicle) 29.80 3.00 120 30 12.0 3

100 22.29 25 10.0 2.5

80 20 8.0 2 15.06 60 15 6.0 1.5 51 5.0 1.08 40 38 10 4.0 0.84 1 24 20 5 2.0 1.8 0.5 1.4

2005 2006 2007 2005 2006 2007 □ Quantity of water pollutants generated (SS) □ Quantity of water pollutants generated (n-H) ● Generated quantity by vehicle (g/vehicle) ● Generated quantity by vehicle (g/vehicle)

(ton) (kg/vehicle) (ton) (kg/vehicle) Consumption of hazardous chemical 3,500 1.6 300 0.13 0.14

1.4 0.12 substances(domestic) 3,000 1.25 250 0.11 1.19 0.10 1.2 215 0.10 2,500 200 1.00 186 170 2,128 1.0 0.04 2,000 1,922 150 1,687 0.8 0.06

2005 2006 2007 2005 2006 2007 □ Consumption of a poisonous substance (NaOH) □ Consumption of a poisonous substance(H2SO4) ● Generated quantity by vehicle (g/vehicle) ● Generated quantity by vehicle (g/vehicle)

(ton) (kg/vehicle) (ton) (kg/vehicle) 50 0.022 0.025 400 0.19 0.20 0.021 0.18 0.018 0.020 0.17 0.18 40 36 36 350 31 0.015 305 300 0.16 30 300 286 0.010 0.14 20 250

2005 2006 2007 2005 2006 2007 □ Consumption of a poisonous substance(HNO3) □ Consumption of a poisonous substance(HCl) ● Generated quantity by vehicle (g/vehicle) ● Generated quantity by vehicle (g/vehicle) HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 117

Index (Sheet & Graph)

Corporate Philosophy People & Society Management Philosophy 20 Number of HMC models in each gas emissions Number of employees in Korea 78 Vision 20 grade category in 2007 56 Domestic employees by job category Management Policy 21 Efforts to achieve the resource circulation target 58 (executives included) 78 Mid-and Long-term Strategies 21 Eco-efficiency 61 Employees on overseas 78 Global Environmental Management Policy 22 Annually generated volume of IMDS data 63 Number of female employees in Korea 79 Environmental Management Strategy 22 e-CMS construction and operation 63 Yearly female employees recruitment status 79 HMC Environmental Management Organization 23 Material balance in domestic business facilities and Idea Competition and group discussions 80 Ethics Charter 24 causes of environmental overload by process in 2007 64 Education for HMC employees in Korea in 2007 81 Guidelines for Employees' Behavior 25 Greenhouse Gas Sub-committee 65 2007 Education Framework and Direction of Hyundai Motor Group Corporate Social Responsibility 2007 Greenhouse gas inventory of domestic the Main Objectives 81 Committee 27 business facilities 66 Clubs at HMC in 2007 83 Board of Directors 28 Reduction of greenhouse gas emissions through Website for hMC employees 83 2007 Activities of the Board of Directors 29 the recycling of waste heat at paint plants 67 i-ESH System 83 2007 Activities of the Audit Committee 30 Greenhouse gas emissions by energy source Annual industrial accident rate 84 2007 Activities of the Ethics Committee 31 at domestic business facilities(2007) 67 Programs to promote mutual cooperation 85 Changes in greenhouse gas emissions at domestic Suppliers that have joined the 5-Star quality club 86 Economy and overseas business facilities of hMC 67 Benchmarking studies on advanced technology 86 2007 status of enlargement of overseas production sites 35 Status of waste disposal(domestic and overseas) 68 Payment 87 Accumulated number of cars sold in the U.S. market 35 Quantity of waste generated(domestic and overseas) 68 Joint procurement by year 87 Strategic Enterprise Management Simulation Model 38 Quantity of waste recycled(domestic and overseas) 68 Education programs to nurture global human VOC management system 41 Changes in water resource utilization resources 88 (domestic and overseas) 69 SCEP schedule and participating suppliers 90 Environmental Management Changes in quantity of water resources recycled Examples of green management practices transfer 91

Changes in average CO2 emissions of HMC cars (domestic and overseas) 69 Green procurement by plant in Korea 91 sold in the EU region 45 Total quantity of air pollutants discharged(domestic) 69 Matters submitted to the 2008 Shareholders'

Low CO2 emission models sold in the EU region 46 Management standard of air pollutants 69 Meeting 92 Changes in combined fuel efficiency(US) 46 Improvement to the dissolved dust collection method 70 Dividend by year(common stocks) 92 2007 Status of response to fuel efficiency Water pollutants generated by domestic 2007 Overseas IR activities 93 regulations in Korea 47 business facilities 71 2007 Domestic IR activities 94 Yearly fuel efficiency achieved in Canada 47 Water pollutant management standard 71 Global CSR Network 100 Conceptual diagram of HEV and how it works 48 Changes in the quantity of VOCs generated Projects by beneficiary 101 Steps for hybrid car development 49 at domestic business facilities 72 Progress in the development of Easy Move Vehicles 102 Fuel cell-powered Tucson 50 Changes in the recovery of VOCs Structure of HMC volunteer groups 102 Fuel cell-powered bus 50 at domestic business facilities 72 Three major volunteering activities 103 History of fuel cell stack development by HMC 51 Total consumption of hazardous chemical substances Volunteering activities by division 103 i-Blue (2007 Frankfurt International Motor Show) 51 by domestic business facilities 73 Social contribution symbols and slogans by language 105 Emission report of the Getz and Sonata against Total environmental expenditure of the three domestic 2007 Global Social Contribution Activities 108 Euro regulations 55 plants in 2007 73 California’s LEV II and Zero Emission Vehicle(ZEV) ISO 14001 certification status 74 regulations 56 118 Appendix

Hyundai Motor Company Worldwide

Hyundai Motor Norway AS(HMN)

Hyundai Motor Company(Eastern Europe Regional Headquarters)

Hyundai Motor United Kingdom Hyundai Motor Company Ltd.(HMUK) Poland(HMP) Hyundai Motor CIS(HMCIS) Taganrog Automobile Plant(TagAZ) Hyundai Central Europe Hyundai Motor Europe Technical Regional Headquarters Center GmbH(HME R&D) Hyundai Motor Manufacturing Hyundai Motor Europe GmbH. Czech(HMMC) Hyundai Motor China Beijing Hyundai Motor Company(BHMC) Huatai Automobile Co., Ltd Hyundai Motor Beijing Office Hyundai Assan Otomotive Sanayi Ve Ticaret A.S Beijing Jingxian Motor Safeguard Hyundai Motor Japan(HMJ) Service Co., Ltd. Reyan Vehicle Manufacturing Co.(RVMCO) Hyundai Motor Japan R&D Center(HMJ R&D) Auhui Jianghuai Automotive Co., Ltd Dewan Farooque Prima Engineering Industries S.A.E Motors Ltd. Hyundai Motor Company Hyundai Motor Company Sanyang Industry Co.,Ltd. (Middle East Regional Headquarters) (Africa Regional Headquarters) Hyundai Motor India Engineering Pvt. Ltd(HMIE) Vietnam Motors Industry Corporation Hyundai Motor India(HMI) Hyundai Motor Company Hanoi Office GIAD Motor Co,. Ltd Oriental-Hyundai Sdn Bhd Hyundai Motor Company (Asia & Pacific Regional Headquarters) Inokom Corporation Sdn Hbd

PT. Hyundai Indonesia Motor

Hyundai Motor Company Australia(HMCA)

Headquarters (Ulsan Plant, Asan Plant, Jeonju Plant, Hyundai & Kia Corporate R&D Division, Hyundai & Kia Eco Technology Research Institute, Commercial Vehicle Development Center)

● Overseas Production Facilities ● Overseas CKD Assembly Facilities ● Overseas Sales Subsidiaries ● Regional Headquarters ● Regional Offices ● R&D Center ● Other Subsidiaries HYUNDAI MOTOR COMPANY | 2008 Sustainability Report 119

Hyundai Auto Canada(HAC)

Hyundai- Kia America Technical Center Inc. (HATCI) Hyundai Detroit Office Hyundai Motor Finance Co. Hyundai Motor Japan(HMJ) Hyundai Washington Office Hyundai Motor America(HMA) World Marketing Group Hyundai Motor Japan Hyundai California Design Center(HCDC) R&D Center(HMJ R&D) Hyundai Motor Manufacturing Alabama(HMMA)

Hyundai Motor Company (Central & South America Regional Headquarters)

MMC Automotriz S.A.

Caoa Montadora de Veiculos S.A.

Hyundai Motor Company Profile Name Hyundai Motor Company Headquarters 231, Yangjae-Dong, Seocho-Gu, Seoul, ROK Foundation December 29, 1967 Chairman & CEO Mong-koo Chung Business area Manufacturing and sales of vehicles and vehicle parts

Main Models by Country (As of December 31, 2007) Category Location Main models Domestic Ulsan 12 models including Genesis Asan Sonata NF, Grandeur Jeonju 4 models including Universe, cargo 4 models including Trago, Special vehicles Overseas HMI (India) Santro, Click, Verna, Avante, Sonata NF, i30 BHMC (China) Verna, Sonata EF, Sonata NF, Avante XD, Tucson HMMA(USA) Sonata NF, Santa Fe HAOS (Turkey) Verna, Lavita 120 Appendix

Reference Material

Published Report 2001 Environment Report 2002 Environment Report 2002/2003 Sustainability Report 2003/2004 Sustainability Report 2005 Sustainability Report 2006 Sustainability Report 2007 Sustainability Report 2002/2003 2003/2004 2005 2006 2007

Others 2006 Business Report 2007 Business Report 2007 PR Report 2008 PR Report 2006 Hyundai Motor Group Society Contribution White Paper 2005 Hyundai·Kia Motor Group Society Contribution White Paper 2006 Hyundai·Kia Motor Group Society Contribution White Paper 2007 Ulsan Plant Society Contribution White Paper

Domestic and Foreign Public Website 공개 웹사이트

Category Site Domain Category Site Domain 공개 웹사이트 Homepage KOREAN www.hyundai-motor.com Club Main club.hyundai-motor.com INTERNATIONAL world.hyundai-motor.com Grandeur club.hyundai-motor.com/club/gog HYUNDAI IN Sonata club.hyundai-motor.com/club/soc YOUR COUNTRY/REGION global.hyundai-motor.com Tuscani club.hyundai-motor.com/club/tog Ethical audit.hyundai-motor.com Avante club.hyundai-motor.com/club/j2 management Verna club.hyundai-motor.com/club/vinside Representative ad.hyundai-motor.com/catalog Atoz club.hyundai-motor.com/club/amg vehicle Others tuscon2009.hyundai-motor.com Santa Fe club.hyundai-motor.com/club/santafe newsantafe.hyundai-motor.com Terracan club.hyundai-motor.com/club/khan www.hyundai-i10.com Sports Soccer team www.hyundai-motorsfc.com Society HMC Society contribution csr.hyundai-motor.com Euro 2008 euro2008.hyundai-motor.com contribution HKMG Society contribution www.hyundai-kiamotors.com Snow festival ski.hyundai-motor.com Service blu-members www.blumembers.co.kr ETC Marketing forum www.marketing-forum.co.kr global service way www.globalserviceway.com Young Hyundai www.young-hyundai.com Motor show 2008 Motor show 2008motorshow.hyundai-motor.com Woman Hyundai www.woman-hyundai.com 2007 Motor show 2007motorshow.hyundai-motor.com Venture plaza www.hkventure.co.kr CONTACT INFORMATION Environmental Management Strategy Planning Team Mail: 231 Yangjae-Dong, Seocho-Gu Seoul, Republic of Korea (137-938) TEL: 82-2-3464-2015 FAX: 82-2-3464-8796 e-mail: [email protected] Website: www.hyundai-motor.com