Ford, Chrysler Criticize Korean Trade Agreement; GM Mum

Ford, Chrysler Criticize Korean Trade Agreement; GM Mum

Ford and Chrysler issued public statements denouncing a free trade agreement signed by the U.S. and  Korea this week. Their objection is that the agreement doesn’t force Korea to open its restricted market.

General Motors has been mum thus far on the topic. GM has important operations in South Korea created from Daewoo that are helping buoy GM’s global sales, while Ford and Chrysler do not have anything similar. The Chevrolet AVeo comes from Korea.

Under the agreement, which must be approved by Congress, the U.S. would immediately drop a 2.5 percent tariff on small cars and auto parts. It will phase tariffs out for trucks, larger engines and tires over the next decade. In return, Korea eliminates engine taxes that penalize U.S. automakers as well as an 8 percent tariff. It agreed to create a "working group to review auto-related regulations being developed," a joint statement said.

South Korea, largely through Hyundai and its Kia affiliate, export more than 700,000 vehicles to the U.S. annually, compared to around 5,000 vehicles sold by U.S.-based automakers in South Korea.

Ford said it was extremely disappointed with the outcome of the free trade negotiations. “Ford Motor Company has supported every U.S. Free Trade Agreement,” Steve Biegun, Ford’s vice president, international governmental affairs, said in a statement.  “As a company that operates and competes in 200 markets globally, we see the real and tangible benefits of free trade. Unfortunately this agreement, as we understand it, will not open the Korean market to free trade in automobiles.”

The Ford statement continued: “The Korean government missed its last, best chance to undo the protectionist policies that over the past two decades have kept the Korean auto market off limits to all manufacturers –- U.S., Japanese, and European. This agreement should not be approved by the Congress in its current form.”

Similarly, Chrysler said: “We have been working with the administration since the beginning of the talks to reduce barriers to the Korean auto market, which is the most closed market in the industrialized world. While we have supported every free trade agreement negotiated by the U.S. government, we will not support this agreement as we currently understand it.”

The UAW as well as U.S. Sen. Carl Levin, D-Detroit and U.S. Sen. Debbie Stabenow, D-Lansing, Mich. joined Ford and Chrysler, in objecting to the new agreement.

GM and Toyota said they are withholding comment.

GM has created an important base of operation in South Korea, made up of the former operations of South Korea’s Daewoo. GM holds a majority stake in GM Daewoo. The Chevrolet Aveo, sold in the U.S., was designed and is built in South Korea, for instance. And GM’s surge in sales in China.

GM’s booming sales in China come largely from Daewoo-based vehicles that GM has badged as Chevys and Buicks. Similarly, GM sells Daewoo-based Chevys in Europe and other parts of the world. In China, GM reported this week that it sold 291,588 vehicles in the first three months of the year, up 25 percent from a year earlier for a 13.9 percent market share. GM expects to sell 15 percent more vehicles in China this year than it did in last year’s record-setting year.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.