Firms consider producing in America to mollify Trump

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Firms consider producing in America to mollify Trump

Korean electronics producers that rely heavily on exports to the United States are scrambling to avoid punitive protectionist measures from U.S. President-elect Donald J. Trump by building factories in America.

LG Electronics is considering putting a key manufacturing base in Tennessee and is set to finalize the plan around the middle of the year.

“If the U.S. offers favors to manufacturers operating inside its territory, exporters [who aren’t] have no choice but to take a hit,” said Jo Seong-jin, CEO and vice chairman of LG Electronics, in a press conference on the sidelines of the Consumer Electronics Show in Las Vegas on Jan. 7.

“We can’t sit still when we have such diverse products from washing machines to refrigerators, ovens and TVs, and we are contemplating to what extent we have to localize our products. We have 80 percent reached a conclusion and will decide in six months.”

LG Electronics, which sends one third of its exports to the North American market, churns out products for the United States from Korean and Mexican factories. Other manufacturing facilities outside of Korea are located in Brazil, Vietnam, China and Turkey.

Recently, LG has been competing against Whirlpool, Electrolux and Samsung in the premium white goods market in the U.S. It ranked second in the U.S. consumer white goods market after Whirlpool in terms of revenues scale in the third quarter last year.

Samsung Electronics is also considering building a new manufacturing base in the U.S.

“We are deliberating various possibilities [when it comes to U.S. factories],” said a Samsung spokesman. He added that the tech giant has a few candidates for locations and is in the middle of discussing them.

Samsung Electronics manufactured appliances for export to the United States in Mexico and they cross the border tax-free. Samsung began simultaneously mass producing TVs and displays at a plant in Tijuana on the West Coast of Mexico in 1996, whereas production of washing machines, air conditioners and refrigerators began in its Queretaro plant, established in 2003 near Mexico City.

Trump has threatened to renegotiate the North American Free Trade Agreement with Canada and Mexico. Most companies operating mass production facilities in Mexico have been sending more than 70 percent of the production volume to the U.S.

On Jan. 5, the president-elect lashed out at Toyota Motor’s plan to produce cars in Mexico and export them to the United States without having to pay border taxes.

“Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S.,” Trump said on his Twitter feed, taking aim at a foreign carmaker for the first time.

The Japanese automaker has been planning to build a factory in Guanajuato, not Baja. The Baja plant, which was established in 2002, produces Tacoma trucks. Trump tweeted: “No Way! Build plant in U.S. or pay big border tax.”

Regardless, Toyota President Akio Toyoda said in response in Tokyo that the automaker is not currently considering changes to its production.

“I don’t know yet exactly how, but, regardless of who becomes president, our business is about being good corporate citizens,” he said.

But some automakers are currying favor with the incoming president. Ford announced last week that it had scrapped plans to build a new $1.6 billion small-car factory in San Luis Potosi, Mexico, and will invest some of that money in a U.S. factory near Detroit instead, which will produce new electric and autonomous vehicles. Fiat Chrysler Automobiles on Sunday pledged to invest $1 billion to modernize two plants in the Midwest and create 2,000 jobs.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]

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