By on March 27, 2018

2015 Hyundai Santa Cruz Crossover Truck Concept - Image: Hyundai

The United States and South Korea reached a free trade agreement on Monday that spared the Asian country from punitive steel tariffs, assuming Seoul keeps an eye on just how much steel it sends to American buyers.

A quota on Korean steel exports means the country can only sell 70 percent of its recent average (2015-2017) to the U.S., though it is hardly Korea’s largest export market. The deal, reached “in principle” ahead of both countries’ meetings with North Korean leader Kim Jung UN, will also see South Korea raise the limit for U.S.-made vehicles that needn’t conform to local safety standards from 25,000 to 50,000.

It’s good news for the Trump administration, but not everyone’s thrilled. Hyundai’s union is hopping mad that a steep tariff on Korean-built pickups — which was set to expire in 2021 under the previous agreement — was just renewed for another 20 years. 

Calling it “humiliating,” the labor group said it had placed its future hopes on hitting it big in the U.S. pickup market. Now, workers in the country find themselves shut out of what their union calls “the future bread and butter of the South Korean auto industry.” The 25 percent chicken tax on light trucks shipped from Korea will continue until 2041.

“The union has called for domestic production of pickup trucks for the past several years,” the union said in a statement.

Nothing’s stopping Hyundai from building a pickup on U.S. soil, but it won’t help the automaker’s embattled (and quite militant) labor force. Already, falling worldwide sales has both workers and union brass on edge, even as the company hastily adopts a crossover-heavy product strategy. Strikes over wages have become commonplace.

From their vantage point across the Pacific, it wouldn’t be hard to see U.S.-bound pickup trucks as a one-way ticket to wealth and prosperity. Obviously, those Yanks can’t get enough of them. From this side of the ocean, however, we’re wondering when Hyundai will finally show us a product it intends to sell. The unibody Santa Cruz sport truck appeared in Detroit over three years ago, and we’ve since grown tired of Hyundai’s repeated promises that the model will indeed reach production.

2015 Hyundai Santa Cruz Concept - Image: Hyundai

Former Hyundai Motor America CEO confirmed the Santa Cruz’s green-lighting in mid-2016, but said the company wasn’t ready to announce it just yet. A year later, Michael J. O’Brien, vice president of corporate and product planning for HMA, again confirmed the model’s future production. As of early 2018, the model remains on Hyundai’s to-do list, but doesn’t carry a firm arrival date. Going on the company’s most recent product plan, the earliest we would see it is in 2020.

Already, the company’s Alabama facilities builds the Sonata, Elantra, and Santa Fe, but word broke late last year that Hyundai is considering Kona, Tucson, and pickup production in the U.S.

As for those Korean workers, they might still get a chance to build a pickup truck for a foreign country — just not the United States. Hyundai Australia is apparently quite interested in a truck, and a brawnier one than the Santa Cruz.

[Sources: Reuters, Bloomberg] [Images: Hyundai]

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21 Comments on “U.S., South Korea Reach Trade Deal; No Korean-built Hyundai Pickups in America’s Future...”

  • avatar
    Ce he sin

    “The deal, reached “in principle” ahead of both countries’ meetings with North Korean leader Kim Jung UN, will also see South Korea raise the limit for U.S.-made vehicles that needn’t conform to local safety standards from 25,000 to 50,000.”

    That sounds like South Korea is more than bending over backwards to encourage the Americans, although truth be told the market doesn’t exist for that number of US type cars in the country and the increase in number is irrelevant.
    Interestingly, I haven’t heard of any reciprocity from the Americans in allowing imports of Korean spec vehicles. I wonder why?

    • 0 avatar
      Big Al from Oz

      From what I can gather the Koreans were going to meet the initial requests regarding vehicle protection that the US has been spruiking on about, even by the people on this site.

      But, as I’ve been stating the US has nothing much to offer in automobiles to the world other than some niche products and a few large Euro luxo barges. This is why the US can’t honour it’s committment to free and fair trade.

  • avatar
    SCE to AUX

    1273 internet buyers of this truck will be furious.

  • avatar

    Doesn’t matter what this trade deal outlines regarding small trucks. CAFE 2025 says the Santa Cruz is a dangerous, earth-killing vehicle that recklessly contemplates combining a small footprint with relatively low combined fuel economy (25mpg, let’s say).

    An act of Congress will be required to make the Santa Cruz a reality in the US market, regardless of where it is manufactured.

  • avatar

    Japan exported trucks to the US for decades despite the chicken tax. Hyundai can follow either Toyota/Datsun: Export bare cab+chassis to Mexico, add NAFTA-made bed there, or Subaru (BRAT): Add two rear-facing plastic seats in the bed.

    The chicken tax is a minor obstacle.

    • 0 avatar

      This. I can’t imagine a Mexican plant can NOT be a massive cost saving. Korean workers make more than US non-union workers so it would still be cheaper even if they assembled the thing north of the border.

      • 0 avatar
        Big Al from Oz

        You need a certain size market for these vehicles. You just don’t build a manufacturing plant. That’s how the chicken tax is designed, it stops imports and prevents/slowsdown the local manufacture of pickups by outsiders.

        It was designed to protect Detroit, who already had the pickup market sown up way back 60 years ago or so.

    • 0 avatar
      Big Al from Oz

      Those mini trucks came with no bed and the beds were fitted in the US, this loophole was closed in 1980.

  • avatar

    As in America, American vehicles carry no real prestige in South Korea (outside of specialty cars like the Mustang and Corvette). Additionally, gas in South Korea is typically $5-5.50 a gallon. America still isn’t great at making A.) small(er) vehicles, or B.) small engines; certainly, it’s no better than Korea is. Given lack of cheap parts availability and the aforementioned points, what reason does a Korean have to buy an American car over a Korean one (or a European or Japanese one)?

  • avatar
    Big Al from Oz

    This comment by the author displays a total lack of comprehension on how the punitive anti pickup tariff in the US is.

    “Nothing’s stopping Hyundai from building a pickup on U.S. soil”

    So, Steph, how many pickup does Hyundai/Kia need to produce in the US to make it competitive and worthwhile? How many pickups from the US are exportable? Get real.

    This is what I figured. The US is uncompetitive and this is highlighted by this deal done with the Koreans.

    If US pickups are sooooo great, why the need for tariffs?

    • 0 avatar

      @BAFO – The Chicken tax hasn’t been about “pickups” since the VW bus platform, Type II pickup.

      But even back then wasn’t about “protecting” anything US built, it was trade war set off by US frozen chicken exports into Europe that were effectively killing off Europe’s chicken industry.

      And since Europe had no poultry exports to fire back against, Type IIs became then next best, viable target.

      Europe then fired back with a pickup truck “chicken tax” of their own and tariffs against car imports 400% higher than the US import tariff on import autos.

      So now removing the US Chicken tax would require a “trade deal” with Europe with both sides signing a pact to drop, or at least equalize tariffs.

      Yeah it was Japanese pickups that suffered the most, but they quickly adapted and eventually launched the “Mini Truck Craze” of the early to mid 1980s.

      The chassis-bed loophole ended in 1979 and Japanese automakers quickly adapted, flooding the US with cut-rate import pickups by the millions.

      If the Chicken tax has ever protected US pickups, it’s mostly pickups from Toyota, Nissan and Honda it protects, but only marginally so, obviously.

  • avatar
    Big Al from Oz

    I bet that GM plant in Korea is kept going, that would apart of this bargain. If so everyone sold everyone out.

  • avatar

    The South Korean union is probably the achilles heel for Hyundai. They are keeping Hyundai from being able to move production to where it makes the most business sense, by requiring Hyundai to basically never cut employment without paying heavily for doing so.

    Yes, Hyundai does have a plant in the US, but what would be better for them is a plant in Mexico. That avoids chicken tax and allows them to produce for global markets (Mexico has free trade with many countries U.S. doesn’t, including Brazil where this truck would also sell) at low cost (cheaper labor than China). My guess here is that the S. Korean labor unions won’t allow Hyundai to find another “low cost” production base, preferring to export as much as possible from Korea.

  • avatar

    Is there any tariff or quota on US cars that DO meet South Korean safety standards? How onerous are those standards? Don’t Korean vehicles sold in the US have to meet US standards?

    • 0 avatar
      Big Al from Oz

      This I find amazing. The US will not accept UN regulated vehicles, but we must accept US vehicles.

      This is the law preventing the US from getting alot of the globals. Add this to the Chicken Tax and its quite a huge barrier.

      Fair trade? Not.

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