GM complains of rising Korean won

Seoul: The chief executive of General Motors in South Korea has urged the new government to act against its rising currency, as carmakers express concern that a weakening Japanese yen is undermining the competitiveness of South Korean exports.

South Korea’s new president, Park Geun-hye, could help manufacturers by pursuing “a policy that favours on the foreign exchange, like both neighbours”, said Sergio Rocha, head of GM Korea, which is one of the US group’s biggest foreign units and exports more than 80 per cent of the vehicles it produces.

“On our left and right side, they do things to support their own industry, to allow them to export — both China and Japan,” Rocha said in an interview with the Financial Times.

Even after a retreat over the past two months, the South Korean won has strengthened by 6 per cent against the US dollar since late May last year.

This is dwarfed, however, by its 27 per cent rise against the yen over the same period, which has come as the new Japanese prime minister Shinzo Abe pushes for looser monetary policy.

South Korea stands “on the front line of the Asian currency war”, says Societe Generale, while industry analysts warn that carmakers will be the hardest hit among the country’s exporters.

Carmakers are more directly exposed to Japanese competition than most other big South Korean groups, and they are now watching as Toyota and Honda enjoy the benefits of a dramatically weaker currency.

Hyundai Motor and its affiliate Kia Motors, the two biggest South Korean carmakers, are expecting sales growth of just 4 per cent this year.

Both companies say that currency concerns are complicating plans to gradually increase the selling prices of their cars, in line with a strategy of moving away from the low end of the market.

“We worry a lot about the exchange rates,” said Lee Soon-nam, vice-president of overseas marketing at Kia Motors. Lee said that while current rates were still “acceptable”, the weaker yen gave Japanese carmakers “more room to offer bigger buyer incentives and increase advertising”.

The threat from Japanese carmakers is strongest in the US market, analysts say, citing their smaller market share in Europe and the impact of rising anti-Japanese sentiment in China.