French action could hit Renault Samsung, GM Korea

Renault Samsung Motors and GM Korea could be severely hit by proposed French government action to invoke “safeguard” measures against cars produced in Korea, auto industry insiders said Thursday.

The French government notified the Korean government of its move to take issue with vehicle trade imbalance and other matters under the Korea-EU Free Trade Agreement.

“We’ve been informed of their policy through the French Embassy on July 24,” said an official of the Foreign Affairs and Trade Ministry.

“The French government is not entitled to issue the safeguard measures,” he said. “We could take countermeasures after reviewing as to whether FTA clauses allow the EU executive committee to endorse the country’s vehicle import restriction.”

As long as Paris does not officially announce the trade sanction, Seoul will not make public any particular counter-policies, he added.

Local auto industry executives projected that Renault Samsung Motors and GM Korea could bear a certain level of damage from a French action, though France is targeting Hyundai Motor and Kia Motors.

A Renault Samsung spokesman said the company’s position is to take countermeasures after the country’s official action is conducted, adding, “We expect there will be (negative) impacts in any way under the scenario.”

The French market accounts for 7 to 8 percent of the automaker’s total exports, he said.

GM Korea spokespeople said France is one of its major export destinations in Europe, adding the company is trying to catch up with the background of the country’s move.

The Chevrolet Spark, a compact sedan from GM Korea, is gaining growing popularity among Europeans.

GM Korea and Renault Samsung are the No. 3 and No. 4 vehicle producers in Korea. The two companies have manufacturing factories in major cities such as Busan, Incheon, Changwon, Boryeong and Gunsan.

In contrast, the impact on Hyundai Motor and Kia Motors, the nation’s two largest carmakers, are likely be relatively small.

Most of the Hyundai-Kia vehicles sold in Europe are produced in EU countries such as the Czech Republic and Slovakia.

“We have not benefited much from the Korea-EU FTA as the tariff was zero even before effectuation of the trade pact,” a Hyundai executive said.

“As French-made cars are suffering lackluster sales in Korea, the country is seemingly moving to take retaliatory action on vehicles that are exported to Europe,” he said.

Hyundai and its affiliate Kia also expect some losses as some export models are produced in Korea, but the greater victims would be Renault Samsung and GM Korea (that own no European plant), he predicted.

Ironically, Renault Samsung Motors is the Korean unit of Paris-based Renault Group. The company is suffering a rapid sales drop at home and abroad.

France’s industry minister on Wednesday slammed what he called “acts of unfair competition” by Korean carmakers, who have boosted their market share in Europe following the free trade deal.

Within the framework of this deal, “we are justified in demanding monitoring measures which may enable us to request a safeguard clause,” Minister for Industrial Renewal Arnaud Montebourg told a news conference.

By Kim Yon-se (kys@heraldcorp.com)