By Kang Seung-woo
The inauguration of Donald Trump as the 45th U.S. president on Friday is placing the nation’s global home appliance powerhouses in quandary over an establishment of production facilities in the United States.
Trump has pressured global companies as well as local business entities to build their factories in his country as part of efforts to create jobs for Americans under his campaign pledge of “Make American Great Again.”
However, LG Electronics and Samsung Electronics are in the initial stage of considering such a plan although the U.S. market is one of their biggest targets.
LG Electronics CEO and Vice Chairman Jo Seong-jin said in Las Vegas earlier this month that the company was reviewing the possibility of building a home appliance plant in the United States .
“Nothing has been decided as yet,” said a LG official, adding that the company is mulling ways to minimize potential risks.
Samsung remains in the same position with its archrival, as well.
“We are currently monitoring the changing circumstances of the U.S. market,” said a Samsung official.
Trump has threatened to slap a heavy tax on goods from Mexico or elsewhere after he occupies the White House.
Currently, the two companies operate their own factories in Mexico and export their goods to the United States without having to pay taxes based on the North American Free Trade Agreement (NAFTA), but Trump is highly anticipated to reform the trade deal as he pledged on the campaign trail.
According to industry sources, the biggest sticking point for the companies setting up factories there is higher personnel expenses than that of Mexico. Their hourly wage in the United States, estimated aat $20-$25, is nearly equivalent to the daily wage of Mexican workers. Due to the wage disparities, many companies that once operated there moved their production bases to China and Mexico.
In addition, such plans to curry favor with Trump may backfire in the future amid unpredictability for the future demand in the U.S. market.
For Samsung, it might not be easy for an early conclusion on the plan as its Vice Chairman Lee Jae-yon is not in a position to decide a new investment plan even though he avoided detention, Thursday, with regard to the corruption scandal involving President Park Geun-hye and her confidant Choi Soon-sil.
Amid the growing concerns, many global companies, including Hyundai Motor Group, surrendered to the billionaire-turned-president’s threats.
Hyundai, the world’s fifth-largest automaker, said earlier this week that it may consider building additional production facilities, while announcing that it will invest a total of 3.6 trillion won ($3.1 billion) in the United States over the next five years.
Earlier this month, Japan’s Toyota also announced its plan to make a $10 billion capital investment in the United States over the next five years and the U.S. automakers General Motors and Ford Motor also followed suit.
Trump said his administration will slap a 35 percent tax on vehicle imports from Mexico.