Sunday, September 12, 2010

[KORUS Free Trade Pact] A Pony to an Equus...

A couple days ago, I was driving -- and while waiting for the lights to turn green, of course, no idea why the light there is green...-- there was this dated Toyota truck right in front of me. Interestingly enough, all the letters from the word Toyota fell off except for, well, "YO." And, well, it sure enough perked my interest to the point where I took a picture of the car. The picture is symbolic of Toyota's fading presence recently; Toyota has apparently recalled over 11 million vehicles in the past ten months.

Now, flip back a couple decades and many car American buyers thought that, well, Japan makes affordable, quality passenger cars so what's different with South Korean cars. Of course, they gap in quality was at that time a gulf. Shoddy brakes on Hyundai cars left a perceived gap in the quality of Korean cars that for some even continues to the present. It also took Hyundai almost two decades to recover its U.S. sales back to that of its heyday in the late 1980s. It's well past that now as Hyundai looks to introduce the Equus.

When I first heard of Hyundai's Equus I thought the name to be pretty funny. The first passenger car that Hyundai ever built was called, well, the Hyundai Pony. In Korea, for some time now, the largest and most expensive car that Hyundai sold has been, well, the Hyundai Equus. The Equus is, well, in latin, horse. So, I thought it a bit funny and somewhat representative of how Hyundai together with its subsidiary Kia Motors has come to be I believe the fifth or sixth largest car manufacturer in the world. They have gone from building ponys to well horses. Hyundai has also opened a factory in Alabama where American workers now assemble many of the cars that are now sold to, well, Americans.

The threat that cheap Asian imports from Korea would displace American jobs seems to be overblown.The cars that South Korea produces compete directly with Japanese car manufacturers more so than it does with American manufacturers. Hyundai -- along with Kia -- seems to be poised to displace Nissan this year as the third largest Asian auto seller in the U.S. after, well, Toyota's slip up in quality. In this sense, the idea that passage of the KORUS free trade pact would displace American jobs seems to be overblown. 

Moreover, much of GM's success in China -- probably the only place in the world where GM's sales have been competitive and consistently profitable in the past decade is due to in large part to the expertise gained from GM taking a stake in what used to be an insolvent South Korean car manufacturer, Daewoo Motors. (By the way, perhaps America's labor unions could see how their South Korean counterparts have come to see the introduction of a large American presence in South Korea's domestic market. Whereas the Chinese takeover of Ssangyong Motors has resulted in, well, disaster, GM's investment in GM Daewoo has come to be seen as a successful merger, if it could be called that, in an industry where successful takeovers are, well, excluding Nissan, for the most part non-existent.)

Moreover, South Korea really likes American beef and they like to buy a lot of it.

So, perhaps, it's time to pass that KORUS.

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