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S. Korea Wages 'Car Wars' With Japanese in U.S. : America Is Battleground as Old Adversaries Fight Over Lucrative Export Market

March 09, 1987|SAM JAMESON | Times Staff Writer

SEOUL, South Korea — A slide presentation at General Motors' new auto parts plant, a joint venture with the Daewoo Corp. in South Korea, begins by reminding visitors that Japan invaded Korea in 1592.

It goes on to tell how Koreans, including a warrior from North Kyongsan Province, where the plant is located, repelled the Japanese. And then it declares: "Once again, Korea finds itself at war with Japan--an economic war. Raise the banner to defeat Japan and compete with the world!"

A GM executive said that all this is aimed at the plant's workers, whose anti-Japanese feelings, like those of all Koreans, were reinforced by Japan's 1910-1945 colonial rule of Korea.

Now a new battle is shaping up between the old adversaries--over automobiles and parts. But nearly all the fighting will be done on a distant battleground, the United States.

This year, three South Korean auto makers--Hyundai, Daewoo and Kia--hope to ship 515,000 passenger cars to the United States. None will go to Japan.

"It's a fact of economic life that we have the biggest market, which also is one of the most open markets in the world," an American economist here said, asking not to be further identified.

As they do with all of their exports, he said, "the Koreans will use all their resources to penetrate the American market first, and only when it reaches a saturation point will they turn to other markets, like the European Community and Japan."

Hyundai, which last year for the first time exported more than 200,000 cars to the United States, and sold 168,882 of them, has set what Chon Sung Won, an executive vice president of the firm, called a minimum goal of shipping 250,000 cars to the U.S. market this year. He added, however, that he hopes the figure will be to 300,000.

An additional 30,000 Hyundai cars will be shipped to the United States under the Mitsubishi brand, for sale in the showrooms of Mitsubishi Motors. Together with Mitsubishi Corp., its sister Japanese trading firm, Mitsubishi Motors owns a 15% share in Hyundai.

Daewoo, in which GM owns a 50% interest, will ship 100,000 LeMans cars to Pontiac dealers this year, beginning March 30.

And on May 7, Kia Motors, in which Ford, Mazda and the Japanese trading firm C. Itoh & Co. own a combined 20% interest, will begin American sales on the West Coast of its Festiva model. The goal for this year is 85,000 cars.

Neither Daewoo nor Kia has previously exported any significant number of passenger cars.

Last year, Daewoo sold only 46,827 cars, all but a handful in Korea. Kia, which the government of President Chun Doo Hwan restricted to the production of small trucks and vans in 1981, has not manufactured any cars at all for six years.

All three firms are looking forward to a booming future. The Ministry of Trade and Industry has forecast an 89% increase in production just this year. Exports are expected to rise to 655,000 cars, nearly 80% of them to the United States.

Expanding Production

By 1990, the ministry expects exports to more than triple from the level in 1986, to 1 million cars, and total production to more than double during the same period, to 1,549,000 vehicles.

Gains could be even greater. According to American economists here, Korean firms are talking about expanding production capacity to 1.5 million units this year and to 2.5 million units in 1990.

Moreover, those forecasts do not include calculations of what might happen after 1989, when the South Korean government lifts a ban on new firms entering the car business. Two Korean conglomerates, Ssangyong and Samsung, are reportedly eager to produce passenger cars, while two others, Daelim and Hyosung, are said to be studying the possibility.

By next February, Daewoo will nearly double its LeMans production capacity, to 300,000 units a year, with as many as 250,000 of them for export, according to Albert G. Bachand, executive vice president. American economists say Daewoo's LeMans capacity will reach 330,000 next year.

Also by early next year, Hyundai will add an additional 100,000 units of capacity, while Kia will expand by 30,000 units.

Unspoken, but very much in mind at these firms, is a fear that South Korean cars, in the not too distant future, may be subjected to the same kind of export restraints that have held down exports from Japan.

They "all want to establish a solid sales record on which any export quota would be based," concluded a report on the industry prepared by American analysts who asked not to be identified.

Hyundai has taken the lead in trying to stave off trade friction by building an assembly plant in Ontario, Canada, and by procuring American parts for its American-bound exports "right from the first--unlike the Japanese," Chung Se Yung, the company's chairman, said.

Last year, according to Chon, the Hyundai vice president, the firm bought $30 million worth of parts from the United States.

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