[Viewpoint] Putting the brakes on auto monopoly

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[Viewpoint] Putting the brakes on auto monopoly


Hyundai Motor’s 2011 YF Sonata will be subject to a recall due to a locking malfunction. Provided by the company

Hyundai Motor issued a recall covering new Sonata sedans this month.

While the recall is a regrettable event for Hyundai and the automobile industry, many consumers thought the move was long overdue. The recall stems from problems with faulty door lock mechanisms on the vehicles. The company warned customers that doors could swing open while the vehicles are in motion. But this isn’t exactly a new problem. Local auto organizations and consumers have complained about this issue ever since the new Sonata model was unveiled last September, but Hyundai basically ignored them.

The automaker even began to sell the vehicles with the faulty locks in the United States early last month. When U.S. media highlighted the door latch problem, Hyundai immediately announced a recall of not only cars in that country but also vehicles in Korea.

Hyundai responded completely differently to concerns abroad than to those in Korea. When domestic consumers raised the issue, the carmaker didn’t flinch. If Hyundai valued Korean consumers as much as their American counterparts, it would not have ignored the complaints here at home. And if Hyundai had listened to domestic consumers, it could have avoided a full-scale recall.

This is not the first time that Hyundai has placed the interests of consumers in other countries above those of its domestic client base.

Some advanced safety devices installed in cars it exports are not found in the vehicles Hyundai makes for domestic consumers. A few days ago, Hyundai announced a recall of the Tucson ix SUV due to a glitch in the air bag system. It was then revealed that cars made for the U.S. market are equipped with quality air bags, while cars for the domestic market have subpar air bags. Hyundai deserves the criticism that it doesn’t have the safety of Koreans in mind.

The root of the problem is that Hyundai more or less monopolizes the domestic market, capturing a 50 percent share. Combined with its subsidiary Kia Motors, it controls a staggering 70 percent of the market.

This means Hyundai can do business here its own way. In contrast, Hyundai is just another carmaker in the United States and has to stay on its toes all the time.

The problems associated with Hyundai’s monopoly have been raised since 1999, when Hyundai acquired Kia. A monopolistic company can abuse its market dominance, hurting the interests of consumers. Case in point: Hyundai has stopped offering no-interest installment payment plans since it acquired Kia. When American consumers are unsatisfied, the company recalls its cars immediately. But no matter how much Korean consumers complain, it stays the course.

The solution is to change the market structure to allow more competition. The best options are to split Hyundai into two or to detach Kia from the Hyundai-Kia Automotive Group. The problem is that such splits are not realistically possible, not to mention the fact that these measures would bring tremendous shocks to the market and economy.

So what is the next best thing? The system should be changed so that consumers can rise to action. Consumers should be able to show a company the consequences of being ignored. The product liability (PL) law should be revised, and a class-action system should be implemented. When an accident occurs due to a defect in an automobile, consumers should be able to easily sue the maker. Currently, when an accident happens, consumers are responsible for proving the cause most of the time. The existing PL law does not clearly define who is responsible for proving the cause of an accident. Yet it is realistically impossible for consumers to prove that it was the result of a mechanical problem. The PL law needs to be revised so that companies have to prove the cause. Moreover, when consumers win a lawsuit, automakers should suffer huge penalties. A class-action system would help offer high levels of compensation for punitive damages.

In the United States, McDonald’s was ordered to pay millions of dollars to a customer who was burned from hot coffee. This is perhaps another reason why Hyundai Motor issued a recall in the U.S. so promptly.

Of course, if the system is changed we might see more unnecessary lawsuits. But we cannot defend the companies forever. There is no reason why such a system is not possible in Korea when it works in the United States. At the very least, we can put an end to the absurdity of a monopolizing company neglecting domestic customers. When it comes to a car, even the slightest glitch could kill.

*The author is a senior economic news reporter and editorial writer of the JoongAng Ilbo.

By Kim Young-wook
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