Hyundai unveils large US investment amid fears of investment, job loss in Korea
Hyundai Motor Group was promised a tariff exemption in return for a large investment in the US.
Alongside US President Donald Trump and Louisiana Gov. Jeff Landry at the White House on Monday, Hyundai Chairman Chung Euisun announced a plan to make an additional $21 billion investment in the US over the next four years.
It would be the group's largest investment in the US to date. Hyundai has become the first Korean company to announce a US investment plan at the White House during Trump’s second presidential term.
Trump, welcoming the US investment plan, said: “As a result, they will not have to pay any tariffs.”
The announcement came about a week before the Trump administration plans to levy "reciprocal" tariffs on many countries on April 2. Hyundai Motor made a significant breakthrough in a looming tariff war.
The investment will be made in the automotive, steel, component parts and logistics, future industry and energy sectors.
Noteworthy in the investment plan is an electric arc furnace-based steel mill to be built in Louisiana.
The group envisions the mill producing steel sheets for vehicles and supplying them to its US automotive factories.
If it builds the steel mill, Hyundai Motor would reportedly become the first automotive group in the US to integrate production systems ranging from molten iron to completed vehicles.
This system is expected to further strengthen the group's global competitiveness.
The latest investment plan should not be seen as just a way to dodge tariffs.
North America is one of the largest markets for Hyundai Motor. It is essential to increase local production there.
Building a steel mill and expanding capacity for vehicle output are indispensable to establishing long-term stability in the company's supply chain.
An integrated system from materials procurement to finished goods production will give Hyundai Motor advantages by reducing costs and improving quality control.
One of the strong points of investing in the US is greater ease in cooperation with American high-tech companies that possess world-leading future mobility technologies.
The Trump administration seeks to rearrange global supply chains around the US not only in vehicles but also in semiconductors, batteries and steel products.
All of these items are among the main exports from South Korea and also form the basis for a wide array of related manufacturing industries in the country.
However, large investments in the US are feared to have an adverse effect on investment and employment in Korea. Worse still, the number of decent jobs is declining, and young people are increasingly giving up looking for work.
Even though expanding investment in the US is inevitable, Korean companies should not neglect making efforts to maintain their production bases in Korea.
Hyundai Motor should keep its promise to proceed with 24.3 trillion won ($16.6 billion) worth of Korea-based investments this year separately from its US investment plan.
The role of the government is important. It should cut red tape in the process of giving approvals, fix outdated regulations and incentivize investments in Korea.
In a bid to prevent domestic manufacturing from contracting, it needs to offer full-scale tax and policy support for investments in high value-added technologies and products.
The US investment plan unveiled by Hyundai Motor is expected to strengthen the hand of the government in Seoul when it negotiates with Washington over trade issues.
Due to the presidential impeachment trial in Korea, the government has not yet contacted Trump directly or even by phone, as he was ramping up tariff threats. It needs to capitalize on a Washington atmosphere that the private sector has made favorable to Korea.
The opposition Democratic Party of Korea, with a large majority of seats in the National Assembly, should stop anti-corporate moves. They have held fast to a 52-hour workweek limit that allows no exceptions at all, sought a revision to the Commercial Act that could cause a flood of shareholder litigation against directors and pushed for a “Yellow Envelope” law that could induce frequent labor strikes.
Change is urgent in the Korean labor market. Labor productivity should be raised and the labor market should be made more flexible. If labor unions fall into collectivism and go on strikes habitually, investment cannot but flow out.
