Tags: US | Korea | auto | cars

US Car Brands Take the Off Ramp in Korea

Thursday, 14 Nov 2013 07:28 AM

By Neal Asbury

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As an exporter, I am a big supporter of the South Korean Free Trade Agreement signed on March 15, 2012, because when we open up foreign markets to American goods, the resulting lower trade barriers and tariffs help make U.S. products more competitive.

During a recent trip to Korea, a journey I have made countless times over the past 30 years, I couldn't help but notice that I saw no American cars. This didn't make any sense to me as we now have a free trade agreement in place.

But after a little digging, I discovered that my eyes weren't deceiving me. The Public Citizen website noted that since the trade deal was enacted, fewer than 1,000 additional U.S. automobiles have been sold in South Korea. Meanwhile, 1.3 million Korean cars were sold in the United States. America's trade deficit with South Korea in automobiles and auto parts has increased 16 percent during the first year of the trade agreement, according to Public Citizen.

Korean car dealerships are everywhere in this country, while American car dealerships are invisible in Korea. This does not seem right to me.

Even President Obama noted this discrepancy when he said: "Part of the reason I want to pass this trade deal is you see a whole bunch of Korean cars here in the United States, and you don't see any American cars in Korea."

There is a deep cultural persuasion in Korea to support their local manufacturers. Perhaps we should learn from this.

The truth is that while we have a free trade agreement with Korea that should provide U.S. car manufacturers access to this important market, Korea imposes huge penalty taxes on U.S. imports and sets emission standards at a level that makes it nearly impossible for U.S. brands to get sales clearances. It's definitely not about quality.

Recently I had J. D. "David" Powers, founder of the J.D. Power and Associates, the voice of the automobile buyer for the past 40 years, on my Made in America show. At 85, he has seen the evolution of the U.S. auto market and proposed that the quality of today's American-built cars is just as good, or better, than the imports are. I agree.

In a 2011 NPR interview, Eric Martin, global trade reporter with Bloomberg News, noted:

"We currently sell 13,000 cars — the U.S. to Korea each year — versus about 600,000 Korean cars coming into the U.S. So clearly there is a big deficit in car exports, and this agreement will help some. But it doesn't change the taste of South Korean car buyers and consumers. And that is an issue that underlies a lot of the concern analysts have about making very broad and aggressive projections about how many cars will sell because of this."

What's worse is that the United States hasn't helped its own cause.

In fact, Martin noted:

"GM has a unit formerly known as Daewoo, which is now being branded under the GM and Chrysler brands. And so there are some consumers in South Korea who are driving cars made by them. But that's under that brand, and a lot of those cars are actually made in South Korea. They're not necessarily exported from the U.S."

That means that we aren't seeing job creation in the United States for exports to Korea.
Hyundai claims its massive Ulsan facility, which employs more than 34,000 people on Korea's southeast coast, is the world's largest auto plant. In addition, GM Korea, which runs five assembly plants in South Korea and a sixth in Vietnam, builds a quarter of all Chevrolets sold across the globe.

Kelsey Mays, writing for the cars.com "Kicking Tires" blog, said:

"Plenty of those cars come here. Census data shows that South Korea ranked fifth in overall transportation equipment exports to the United States in 2012. The U.S. imported $10.6 billion in passenger cars from the country, excluding tariffs and shipping costs. And auto imports go beyond finished cars and trucks. From alternators to airbags, vehicle components constituted another $5.6 billion in imports. Put it all together, and the U.S. imported about as many cars, trucks and vehicle components from South Korea in 2012 as it did from China, the United Kingdom and Sweden combined."

What's worse, according to Mays, is that South Korea is home to at least two dozen Ford and Chrysler suppliers. For example, the National Highway Traffic Safety Administration reports 17 percent of the Chevrolet Volt's parts come from South Korea, and so do more than a quarter of Chevrolet Sonic's parts. Automakers aren't required to name countries that contribute less than 15 percent of parts, so it's likely that dozens more cars also contain parts from South Korea.

Are we really ready to tell David Powers that he's wrong — that U.S. brands aren't as good as Korean brands? I'm not. In fact, when I travel, I have a standing agreement with Hertz that I will only rent American-made cars.

Ready to join me? I'm not suggesting that South Korea doesn't make good cars. They do. But why not try an American-made model before you buy a Korean model? Let's send a message to Korean drivers that if they aren't buying U.S. auto brands, they are short changing them themselves.

We have too many people not working, and if we can boost U.S. car exports to South Korea, we can put thousands of trained auto workers back to work.

The last thing we want to export are more American jobs.

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