With Hyundai Motor Co. establishing a manufacturing foothold in Montgomery, Ala., industry observers wonder whether the automaker's first U.S. auto plant will lure a wave of Korean parts competitors to North America.
But it might be General Motors and Ford Motor Co. that do the luring.
Samlip America, one of Hyundai's biggest Korean suppliers, came to America five years ago - not on news of Hyundai's intentions to produce cars here but to make shift and brake assemblies for GM.
Samlip's factory in Clinton, Tenn., was opened in response to the GM purchasing department's desire to source locally.
Eye on Asia
"Ford and GM have both expanded their Asian buying programs," says Dan Nichols, an automotive manufacturing representative from Auburn Hills, Mich. "But they want us to produce here."
Nichols' firm, MWN Group, helped Samlip and a number of other suppliers not based in the United States to set up U.S. production in an industrial park in Clinton, about 30 miles east of Knoxville, Tenn.
"The Asian region is becoming a major source of parts for the Big 3," Nichols says. "I predict we will even see Chinese parts companies manufacturing here in the next five years."
Korean and Chinese auto parts imports have boomed. Korean companies shipped $1.4 billion in parts to the United States last year, up from $664 million five years earlier, according to the U.S. Census Bureau.
Chinese factories shipped $2.2 billion to U.S. customers last year, a 200-plus percent increase from $795 million in 1997.
By comparison, sales of imported Japanese parts have declined 7 percent this decade.
The arrival of the first Japanese auto plants here in the 1980s triggered an explosion of U.S. parts manufacturing by Japanese suppliers.
Since then, those companies also have fought for a share of Big 3 contracts.
Milton Park, CFO of metal stamper Hwashin Co. Ltd. of Korea, envisions a similar role for his company. Hwashin said in March that it would build a production plant in Alabama to supply Hyundai.
"We will concentrate on Hyundai at first, of course," Park says. "Maybe after three or four years we will look for Big 3 business."
Size a key issue
Michael Flynn suspects that Korean and Chinese companies will have a tougher job in North America than the Japanese suppliers.
The flow of automotive parts to the Untied States from Korea and China has risen steadily. (Imports of parts in millions of dollars.)
Flynn, director of the University of Michigan's Office for the Study of Automotive Transportation, has just completed a study of issues facing the Korean industry in North America. A big one, he says, is size.
"The suppliers we're talking about coming over tend to be smaller than many of the Japanese companies that came here and succeeded," Flynn says.
"Many of them are family-controlled and still have pretty thin management resources," he says.
Thin management ranks hurt some Japanese suppliers as they tried to sink their roots in North America, Flynn says.
"They discovered they needed to go get business in Detroit, and they just didn't have the resources to do it," Flynn says.
"They lacked the language and cultural skills, the knowledge of how the Big 3 work, the presence in Detroit.
"These Korean companies may find themselves in that same situation."