By Kim Hyun-cheol
Staff Reporter

Is the Korean car industry headed for a major shakeup?

Global markets are entering a deep freeze, with demand in a tailspin. Ford, Chrysler and GM are asking their government for help, as are European carmakers that are pressing for subsidies. Toyota, the Japanese carmaker that threatened to topple GM as the world's biggest automaker, is also gearing up for reductions in production.

All the pieces that are falling in place indicate a dismal winter for the Korean car industry, but, by many signs, that winter has not arrived in full force.

Hyundai-Kia, Korea's biggest automotive group, has posted decent showings but is also offering discounts to reduce inventories, and tweaking its production volume.

``Except for Hyundai-Kia, other Korean carmakers could fall prey to the reorganization of the global car industry,'' said Lee Hang-koo, at the Korea Institute for Industrial Economics & Trade.

Among those ``other'' carmakers is Ssangyong Motor, which has seen its production and sales plummet since even before the global slowdown started. For China's Shanghai Automotive Industry Corp., which owns a major stake in the Korean carmaker, Ssangyong is not a top priority, Lee said.

Regarding Ssangyong, Lee said that the chances of a full government bailout are low but nonetheless help will eventually be on its way, if it heads toward bankruptcy.

Although to a lesser extent than Ssangyong, GM Daewoo, the Korean unit of the biggest American maker, GM, also appears to be in trouble. Last week it said it would consider suspending operations at its three plants here for about two weeks from Dec. 22. It has already delayed the introduction of some new products by one year.

``The company will postpone launching two of our new models originally slated for next year to 2010.'' Josef Edlinger, GM Daewoo's vice president of sales, said last Thursday.

``Car production lines are located in provincial areas and their presence provides key sources for employment to support the regional economies,'' Lee said. ``So the government won't likely turn a blind eye if they ask for help. GM's European unit, Opel, has already sought help from the German government.''

Layoffs have taken place since the Asian financial crisis in the late 1990s. Daewoo's bus production unit decided earlier this month to lay off 300 and freeze the wages of its remaining workers.

Prof. Hyun Young-suk at Hannam University expects government help to not be warranted for the troubled carmakers. ``It is not just the car industry but others that are struggling,'' Hyun said. ``If it helps the carmakers, it should help other ailing companies.''

But experts call on the carmakers to do their part in order to enable themselves to survive without asking for a bailout.

Top priorities come down to reducing stockpiles and meeting the changing needs of customers.

Prof. Hyun said that, if properly adapted to changes, a crisis could turn into an opportunity. ``In the U.S. market, new car buyers prefer small cars, giving Korean carmakers an edge. The won's depreciation is an export advantage while the Japanese yen remains strong,'' he said.

However, there are other signs that adapting won't be easy because changing consumer preferences are not the only thing to be taken into consideration.

U.S. President-elect Barack Obama is looking to put up barriers for non-American carmakers so as to boost the sales of the ailing Big Three. This protectionist move, if implemented, will likely hurt Korean carmakers, according to experts.

hckim@koreatimes.co.kr