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Tue, January 19, 2021 | 14:14
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Looming US election throws challenges to Hyundai, tiremakers
Posted : 2020-06-26 17:01
Updated : 2020-06-26 17:57
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Hyundai Motor Manufacturing Alabama / Courtesy of Hyundai Motor
Hyundai Motor Manufacturing Alabama / Courtesy of Hyundai Motor

By Nam Hyun-woo

The looming U.S. election is weighing heavily on Korean carmakers and tire makers, as local unions and politicians are pressuring the companies to produce more products on American soil, or face hefty duties, industry officials said Thursday.

The United Steelworkers (USW) union recently revealed Democratic presidential candidate Joe Biden's answers to the union's candidate questionnaire.

In the questionnaire, the USW called for stronger rules of origin provisions in trade agreements, requiring "melting and pouring of steel products" or "domestic content thresholds in automobiles over 60 percent."

Biden answered that "rules of origin need to be carefully written to ensure that when a product is labelled Made in the USA, it really means that" and "steel and other products like aluminum must be melted and poured in the United States so that (other) countries can't exploit loopholes."

The USW is the largest private sector union in North America, having more than 850,000 members across the continent.

Currently, Hyundai Motor and Kia Motors assemble vehicles in the U.S. with steel produced by their affiliate Hyundai Steel and other steelmakers in Korea. Since the steel is processed at Hyundai Steel America, those vehicles ― approximately 300,000 a year ― are exempt from duties.

If the rule of origin gets amended to require the melting and pouring of steel products in the U.S., the carmakers will have to rely on U.S. steelmakers to avoid duties, meaning Hyundai Motor Group will have to make major changes to its supply chains.

Hyundai Motor's 2019 sales volume in the U.S. grew 4.7 percent year-on-year, ending two consecutive years of backpedaling. As Biden, President Donald Trump's opposition candidate, also drops hint at protectionist moves, the company's rebound in the U.S., may fail to pick up momentum.

The Trump administration's apparent pressure for Hyundai Motor to assemble new models in the U.S. is a challenge for the carmaker.

Hyundai Motor union recently claimed the U.S. is demanding the Korean government pressure Hyundai Motor to produce the NX4 ― the codename of the new generation Tucson ― in the U.S., which will "never be accepted."

The Tucson is one of the more popular Hyundai vehicles in the U.S., and is produced at Hyundai plant No. 5 in Ulsan. Though Hyundai Motor said it has not considered producing the new Tucson in the U.S., the union claimed rumors are growing among employees.

Hyundai Motor Manufacturing Alabama / Courtesy of Hyundai Motor
Hankook Tire's plant in Tennessee / Courtesy of Hankook Tire

Korean tire makers are also under pressure to increase their production in the U.S.

On June 23, the U.S. Commerce Department decided to launch an antidumping and countervailing investigation into tires from Korea, Taiwan, Thailand and Vietnam, following a USW petition in May.

In its petition, the USW alleged dumping margins as high as 195 percent for Korea, claiming "this deluge of unfairly traded imports hurts our domestic industry and workers."

If their petition is accepted, the prices of Korean tires in the U.S. will triple, meaning they will lose competitiveness in the market.

Korea tire makers have said the USW's allegation is groundless before the Commerce Department's decision, but they are now responding more seriously about the possibility of facing the duties.

During an interview with Tire Business, Hankook Tire & Technology CEO Lee Soo-il said the company plans to reorganize its production portfolio across the world and increase its output in the U.S., in an apparent response to the potential increase in duties. Hankook Tire has a plant in Tennessee.

Kumho Tire, which also has a plant in Georgia, said it will set up a taskforce to address this risk.


Emailnamhw@koreatimes.co.kr Article ListMore articles by this reporter









 
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