Chrysler bankruptcy may bode ill for South Korean automakers

SEOUL, May 1 (Yonhap) -- Chrysler LLC's possible collapse would impact South
Korean carmakers and suppliers as it would ultimately shrink their largest export
market, analysts here said Friday.

After months-long negotiations with bondholders were broken off, the
third-largest U.S. automaker filed Thursday for bankruptcy protection in New
York. Chrysler has said it will halt production until it is no longer bankrupt.
Should it collapse, it would deal a massive blow to General Motors Corp., the
United States' biggest automaker, which has been staying afloat on government
loans amid fears it too may file for Chapter 11.
"The crisis at Chrysler is profound because it could pose negative consequences
to GM," said Kim Phil-soo, a professor of automotive engineering at Daelim
University. "If GM also fails, the North American auto market will shrink
significantly."
Chrysler's bankruptcy filing may also be a "warning signal" from the U.S.
government that it will not continue to grant special treatment to GM, Kim said.
South Korean auto-parts makers, which rely heavily on the U.S. market, should
also be cautious, as the collapse of one of the Detroit's Big 3 would disrupt
their sales, analysts say.
In the short term, however, Hyundai Motor Co. and its affiliate Kia Motors Corp.
are expected to see their sales rise in the U.S. market.
"The possibility of Chrysler seeking bankruptcy protection has been factored in
our management plan since early this year," said an official at Hyundai Motor,
South Korea's top carmaker. "We aim to expand market share in the U.S. by
securing more dealers and strengthening marketing campaigns."
In March, Hyundai Motor Chairman Chung Mong-koo said he would embrace the worst
crisis facing the global automobile industry in decades as an opportunity,
shifting the company's emphasis to increasing sales growth and closing the gap
with foreign rivals.
"The global auto industry is now in the midst of a fierce battle for survival,"
Chung told an annual meeting of Kia shareholders.
"We will overcome the global auto crisis by putting our priority on increasing
sales," he said. "The crisis, in other words, is an opportunity for innovation."
In the first three months of this year, Hyundai's market share in the U.S. rose
1.6 percentage points from a year earlier to 4.3 percent.
Hyundai plans to boost its U.S. market share to five percent, using its generous
incentive program that allows U.S. customers experiencing financial difficulties
to return their vehicles free of charge.
Under the program, those who purchased a Hyundai vehicle but can not make their
payments due to layoffs, personal bankruptcy or accidental health issues can
return the vehicle within a year of purchase.
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