As tensions between North and South Korea continue to rise and countries brace for potential conflict, it could have a significant impact on South Korean auto manufacturing. Hyundai employs 34,000 people at their Ulsan factory, and they claim it is the largest auto plant in the world, according to a Cars.com blog. In addition, General Motors has offshored manufacturing to five plants in South Korea with 17,000 employees, according to Dow Jones Business News.
South Korea ranks fifth overall in transportation exports to the U.S. based on Census data, Cars.com says. Hyundai and Kia automobiles produced in the U.S. may contain a majority of parts exported from South Korea. GM produces 145,000 vehicles per year for the local market and 1.3 million vehicles for export in its Korean plants. The factories also contribute to new vehicle development, according to Bloomberg. South Korea is also home to several suppliers for Ford and Chrysler. Cars.com estimates 330,000 vehicles sold in March 2013 contain Korean-made parts. If the production supply chain is disrupted, 9 percent of the U.S. new car market would be affected.
Assessing the risks
GM in particular is considering moving its manufacturing out of Asia. Its South Korean operations are too large to have the enterprise agility to move out of the region quickly. GM CEO Dan Akerson told Bloomberg they have to consider the safety of their employees and risk to the supply chain.
If tensions continue to rise, the auto industry may not feel the impact immediately. Many dealers have enough inventory of Korean-produced cars to meet demand for at least two months so U.S. shoppers may not see shortages right away, reported to Cars.com. However, auto manufacturers will continue to keep an eye on the situation in Korea.