Repercussions from Volkswagen saga

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Repercussions from Volkswagen saga

In the late 19th century, England was troubled with counterfeit goods. An underdeveloped country in Europe labeled their goods falsely as “Made in England.” The Merchandise Marks Act was passed in 1887, but still, goods were marked as British while packaging indicated the true origin. The goods that were merely assembled in England claimed to be “Made in England,” while most of these falsely labeled products originated from Germany.

Britain was the leader of the industrial revolution, and its superior technology was used to make renowned cars such as Bentley, Jaguar and Rolls Royce. Volkswagen’s legend couldn’t have been possible without Britain’s involvement. After World War II, the British army reopened the German military vehicle factory from devastation and produced the “Beetle.”

Only US-made vehicles can compete in Nascar races in the United States because of the British cars. In the 1954 race, Jaguar drivers got the first, fourth, fifth and sixth places, and foreign cars were not allowed to compete after that event. In the 1950s, Great Britain was the largest automobile exporter.

But in the 1970s, British cars declined suddenly. They adhered to old fashioned designs and set up factories in remote villages with not many skilled workers. So, even new cars needed repair right away. The most critical problem was the chronic labor conflicts. They frequently went on strike.

America’s “big three” car makers, GM, Ford and Chrysler, experienced the same fate. The unions pressured the companies to pay medical insurance and pension for retirees, which added up to $10 billion. It practically added $1,500 to each vehicle they made, and they could not compete with Japanese and European rivals.

The latest Volkswagen scandal can actually benefit the Korean economy. In fact, Hyundai-Kia Motors’ sales in the United States increased by 17.8 percent last month, the highest rate in history. Hyundai-Kia Motors’ market share in Korea is 64 percent, and may be the only country where a single car maker has such a dominant presence. And this company is swayed by a union whose members’ average salary is 90 million won.

It takes 15.4 hours for a Hyundai Motors factory in the United States to produce one car, while it takes 30.5 hours in a Korean factory. But the hourly wage is $39 in the United States and $40 in Korea. Korea’s productivity is subpar. Yet, the union demands 7.84 percent raise in base salary and an extension of retirement age to 65. When demands were not accepted, union members went on a strike for three days, resulting in a 200 billion won loss.

Many Koreans feel pressured to use Korean products. But even Korean cars won’t sell if they are not worth the price.

It is worrying that the Volkswagen scandal will affect the good image of imported vehicles that are challenging the apparent monopoly of Korean cars.

*The author is an editorial writer of the JoongAng Ilbo.
JoongAng Ilbo, Oct. 5, Page 35


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