By Doron Levin
FORTUNE -- The remarkable rise in popularity of Hyundai and sister brand Kia with U.S. car buyers has largely unfolded over the past few years against a backdrop of calm on the Korean peninsula. As tensions rise in the manufacturer's homeland, some are asking how unrest might affect Hyundai's surging global business.
The prospect of armed conflict between North and South Korea threatens manufacturing in the south, where Hyundai Motor Group is located. Japan, China, and the U.S. almost certainly would be drawn into any regional conflict that jeopardized sea lanes and air traffic. Hyundai Motor, in its bid for top-tier global status, has spread operations worldwide, constructing two U.S. vehicle assembly plants in the past decade, in Alabama and Georgia. The plants rely mostly on parts suppliers that also operate locally. About 57% of Hyundai's production capacity resides outside South Korea.
Chris Hosford, a spokesman for Hyundai Motor in the U.S., noted that Hyundai's three top-selling vehicle models in the U.S. -- Sonata, Elantra, and Santa Fe -- are built locally. Presumably, Hyundai and Kia's U.S. operations wouldn't bear the full brunt of any potential disruption in South Korea.
Through March of this year, Hyundai's three top sellers accounted for 69,977 of 96,024 vehicles sold in the U.S. Hyundai unit sales are up 2.3% for the year. Don Southerton, an expert on Korean business and culture who consults for Hyundai and other Korean companies, said "South Koreans, other than those scarred by the conflict of the early 1950s, tend to play down current tensions with the north." Of course, many Israelis, including government officials, never believed that Syria and Egypt would dare attack in 1973 -- until the day it happened.
The 2011 tsunami that disrupted Japanese industry, including the country's major automakers, did have a profound effect on Korean planners, Southerton said. Following the disaster several big South Korean corporations, including Hyundai, decided to set up emergency offshore centers that could serve as headquarters if needed. Southerton thinks tensions could continue until South Korea finds a way to allow North Korea to back down gracefully from its aggressive stance. It's "a tactic South Korea has followed in the past to ease tension on the peninsula," he said.
The latest sign of tension came this week as North Korea blocked the entry of hundreds of South Korean workers into a joint industrial zone that had been a symbol of economic cooperation. Previously North Korea threatened a preemptive strike against the U.S., prompting a flyover of the south by U.S. military aircraft. The U.S., meanwhile, is moving missile defense systems into the region.
For some, military conflict on the Korean peninsula remains improbable, if not unthinkable. But improbable events can arrive like black swans, that is to say, unexpectedly. Last year China and Japan suddenly were at odds over sovereignty of several small islands, creating a diplomatic furor. Car buyers in China immediately began boycotting Toyota (TM) and other Japanese brands, which translated into lower earnings. The tension has since calmed, though sales of Japanese brands in China have not totally recovered.
Hyundai (along with electronics titan Samsung) might be the one of the proudest and most visible symbols of South Korean industrial might. As such, the automotive brand could be a tempting target for a North Korean regime that often seems determined to self-destruct. Fortunately, Hyundai's global scale seems to afford it some protection.
Hyundai's newest CUV, the Santa Fe, couldn't be more in line with U.S. drivers' tastes. And the Korean auto company is counting on that.
By Doron Levin
FORTUNE -- The growing preference among American motorists for crossover utility vehicles -- so-called CUVs -- is reflected by the stream of new variants to reach showrooms. The latest? Hyundai's seven-passenger Santa Fe.
Hyundai has risked confusion by calling its new model the Santa Fe -- MOREMar 18, 2013 12:18 PM ET
Hyundai's two new cars and its luxury-car strategy offer proof that GM, Ford and Toyota ought to worry more about the South Korean automaker than one another.
By Doron Levin, contributor
FORTUNE -- Two main themes of 2011's post-recession competition in the U.S. car market so far are: 1) the rebound of Detroit and 2) the stumbles of Toyota.
A third and equally significant development has drawn less attention, namely the surging fortunes MOREJul 6, 2011 8:15 AM ET
The year just ended was a sensational one for Hyundai, and the Korean automaker begins 2011 by introducing a sensational car.
Hyundai exceeded 500,000 unit sales in the U.S. in 2010 and established itself among the industry's top seven sellers.
Equally important for the long-term future of the brand, it created, right out of the box, a premium luxury car in the Equus that is the equal of the Mercedes S-class and MOREJan 18, 2011 11:41 AM ET
Despite a steep price tag and less than stellar drivability, the 2011 Sonata puts Hyundai in the hybrid game, giving shoppers another reason to consider a brand they might have snubbed a few years ago.
In 2010, the Hyundai Sonata came out of nowhere to break into the ranks of the 10-best selling vehicles for the first time. Don't be surprised to see it challenge for the top five in MOREDec 30, 2010 10:31 AM ET
I have to confess: I hadn't been totally sold on Hyundai. Yes, it offered superb value -- more equipment than you expected for the price. But the designs were at first too quirky, and then too bland -- frankly imitative of its competitors. Hyundai seemed more a clever follower than a market leader.
The 2009 Genesis sedan was the first Hyundai that showed real originality as well as a sophisticated aesthetic. MOREMay 19, 2010 11:27 AM ET
|McDonald's gives Charles Ramsey free food for a year|
|The 'chicken poop' credit and other bad tax breaks|
|Doomsday investors betting on market crash|
|Ackman wins, P&G dumps CEO|
|Another downer day on Wall Street|