It's not so long ago that South Korea's shipyards were keeping the world afloat.
The slipways of Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries accounted for more than a third of the global market. Then competition from China increased, debt got out of control, and the entire industry was left holed below the waterline.
Something similar may be about to happen to the country's car industry.
Eyes are currently trained on General Motors' local unit. The parent is offering a $2.8 billion new investment plan for the business, or may consider a debt-for-equity swap instead, as it prepares to close one of its four plants in the country, a policymaker has said.
The market, where GM is the third-biggest player after Hyundai Motor and its Kia Motors affiliate, has long been regarded as next on a hit-list that's seen chief executive Mary Barra exit underperforming businesses in Russia, Europe, India and Australia. Should the current rescue plans fail to attract support from the government - which has a 17 per cent stake in the business via the Korea Development Bank - the whole operation could be shut down.
That could be just the start of it.
Economies of scale are vital in the car industry, and taking out a large car maker can have a devastating impact on both the supply chain that feeds it and the rival manufacturers that buy parts from the same suppliers.
That system is already under strain in Korea. Car export volumes dropped for the fifth consecutive year in 2017, with rolling 12-month units hitting their lowest level since 2010. The country is suffering the fastest export contraction of any major car making nation, with overseas sales falling 3 per cent a year in the five years from 2012 and 10 per cent in 2016 alone, according to figures from the International Trade Centre.
Other major exporters, such as the US, could survive that sort of impact thanks to a robust domestic market. But Korea's car makers would be crippled without trade: sbout 85 per cent of Hyundai's local production is exported, plus 65 per cent of Kia's and 75 per cent of GM Korea's.
Given that dependence, goings-on elsewhere in Ms Barra's shrinking empire are a primary reason for the current state of GM Korea. A core element of the turnaround plan for Opel-Vauxhall, the European unit that GM sold to Peugeot last year, is to cut imports, Reuters reported last November. That would have an outsized impact on GM Korea, which sends about one-fifth of its vehicles to Europe.
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There are worrying signs on the other side of the Atlantic, too. Hyundai and Kia established a bridgehead in the US when Detroit was paralysed by the bankruptcy of GM and Chrysler, with the two brands briefly attaining a 10 percent market share in 2011 that put them in contention with Fiat Chrysler Automobiles, Honda Motor and Nissan Motor in the race for fourth position.
Since then they've taken their eye off the ball. Hyundai and Kia sold 147,000 fewer cars in the US in 2017 than they did in 2016, a drop of more than 10 percent. As has been argued, new models might be able to stem the weakness - but if they fail to delight drivers, management have few cards left to play.
That's a worry, because it's little exaggeration to say that Hyundai's and Kia's US sales are a project of national importance to South Korea. Fully 42 per cent of the country's car exports go there, a degree of single-market trade exposure that's really only matched by Japan.
Japan has some pronounced advantages in this race. President Donald Trump's love-in with Prime Minister Shinzo Abe stands in sharp contrast to his awkward relationship with Korean President Moon Jae-in, riven by Washington's drumbeat of war over North Korea and Mr Trump's pledge lthis month to renegotiate a "very, very bad trade deal" with Seoul.
South Korea is in many ways the Asian country most at risk from a more protectionist US Its unit labour costs rose dramatically in recent years even as those in Japan fell, leaving the country more dependent than ever on a weak currency to keep exports competitive. But the won has been in the crosshairs of the US Treasury's biannual reports on currency manipulation for years. If Washington opens fire on the Chinese yuan, Korea risks catching a bullet.
Korea's politicians and automotive unions hoping to beg some extra cash out of Detroit should be afraid. While they scramble for pennies, a steamroller is approaching.
If they don't change, fast, they could end up flattened.
Bloomberg
