A North Korean military attack would pose a risk to sales and investment in South Korea by U.S. companies, including those in the automotive and semiconductor industries, according to a Bloomberg Government study.
U.S. imports of goods produced in South Korea, including vehicles and smartphones, may also be disrupted, at least temporarily, in the event of an attack by the totalitarian regime led by Kim Jong Un, according to the study by Ken Monahan, a senior global business analyst with BGOV.
Tensions on the Korean peninsula have heightened since February, when North Korea ran an underground nuclear-weapon test in defiance of United Nations Security Council resolutions. Kim’s regime has threatened war against the U.S. and South Korea over UN sanctions enacted after the Feb. 12 blast.
The crisis has weighed on South Korean shares, with the benchmark Kospi index (KOSPI) falling 1.3 percent on April 12, the most in a week, as offshore investors sold equities on concern that profit at builders and shipyards will slump and tensions with the Kim regime may escalate.
South Korea is the seventh-largest U.S. trade partner for goods and services, with transactions valued at $134 billion last year, according to the BGOV study. In 2011, Americans invested $31.8 billion in South Korea, compared with $18.4 billion by South Koreans in the U.S.
The situation has implications for American companies with operations in South Korea. General Motors Co. (GM) is “making contingency plans for the safety of our employees” in the country to the extent that it can, Chief Executive Officer Dan Akerson said in an interview aired April 4 by CNBC.
GM has five plants in South Korea, where it builds 145,000 vehicles for domestic sales and 1.3 million for export, Akerson said. The company had $8.91 billion in 2012 sales in the country, the most among U.S.-based publicly traded companies with a market value of $1 billion or more, according to data compiled by Bloomberg.
The Detroit-based automaker was followed by Qualcomm Inc. (QCOM), the San Diego-based seller of semiconductors for mobile telephones, with $4.2 billion in sales in South Korea, and National Oilwell Varco Inc. (NOV), the Houston-based maker of oilfield equipment, with $3.12 billion.
President Park Geun Hye pledged last week to ensure a “stable environment” for international investors to operate in South Korea without worry about provocations from her country’s northern neighbor.
“South Korea has achieved remarkable economic growth and democratization over the past 60 years under constant North Korean threats,” Park said during an April 11 luncheon with representatives from companies including Google Inc. (GOOG) and eBay Inc., according to a statement from the president’s office.
With the Kim regime preparing for a possible missile test, perhaps as soon as tomorrow, U.S. Secretary of State John Kerry met with his South Korean counterpart, Foreign Minister Yun Byung Se, April 12 to discuss escalating tensions in the region.
North Korea may conduct a weapons test to coincide with tomorrow’s 101st anniversary of the birth of Kim’s grandfather, state founder Kim Il Sung, South Korean Defense Ministry spokesman Kim Min Seok said April 11 in Seoul. North Korea fired a long-range missile that disintegrated shortly after liftoff on April 13, 2012, then successfully launched one in December.
The U.S. reaffirmed yesterday that it will defend South Korea from its northern neighbor’s “unacceptable provocations” and “dangerous” nuclear and missile programs, according to a joint statement with the Park government.
Both countries, whose alliance dates to the 1953 armistice that ended the Korean War, said they were taking “prudent measures” in the wake of North Korea’s belligerence.
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