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Automakers hopeful yet cautious on South Korea-U.S. free trade agreement

Automakers said Thursday they are hopeful a free trade agreement between South Korea and the United States will prove a boon to their industry, but taking a cautious approach until the deal gets final approval.

"The specific details of the free trade agreement are still being analyzed by all of the auto manufacturers," Michael Grimaldi, president and CEO of GM Daewoo Auto & Technology Co., said on the sidelines of the 2007 Seoul Motor Show. "We export our products around the world. We look forward to the resolution of the agreement."

South Korea and the U.S. agreed Monday to eliminate or lower tariffs and other barriers to trade, including in the auto sector, in a landmark deal that took 10 months to negotiate and was finished just minutes before a U.S.-imposed deadline.

GM Daewoo, created in 2002 after GM acquired the now-defunct Daewoo Motor, could be in a unique position to benefit from both ends of the deal. The company accounts for about 13 percent of General Motors Corp.'s total group production and exports some models, such as the Aveo, to the United States. The company exported 116,761 vehicles to the U.S. last year.

"I would also just remind everyone that obviously both governments must still approve the agreement before it goes into effect," Grimaldi said, referring to the need for the U.S. Congress and South Korea's National Assembly to ratify it.

Auto trade was a major hurdle in the negotiations for the agreement, the biggest for Washington since the North American Free Trade Agreement, which went into force in 1994, and South Korea's largest ever.

The two sides knocked heads over auto issues such as Korean taxes based on engine displacement, which the U.S. called discriminatory against larger cars, South Korea's higher tariffs as well as a steep U.S. duty on pickup trucks.

The two countries finally agreed to phase out all tariffs on cars. The U.S., which currently imposes a 25 percent import duty on pickup trucks, also said it would drop duties on those vehicles in 10 years.

The U.S. has a huge deficit with South Korea in autos.

South Korean automakers sold 730,863 vehicles in the United States in 2005, while American auto companies sold 5,795 in South Korea, according to Commerce Department figures.

Autos make up about 20 percent of South Korea's exports to the United States, the world's biggest vehicle market.

Hyundai Motor Co. expressed optimism.

"The market share we gain in the states will offset the market share gain of the U.S automakers here in Korea," said Hyundai Motor Co. spokesman Jake Jang. "This agreement will be beneficial for both countries."

Hyundai said Wednesday it would conduct a feasibility study on whether to start manufacturing pickups. The company, the world's sixth-largest automaker in conjunction with affiliate Kia Motors Corp., currently does not make the vehicles.

Automakers from South Korea, the U.S., Europe and Japan were exhibiting their cars at the Seoul Motor Show, held every two years. The exhibition opened to the media Thursday in Goyang, near Seoul, with the general public allowed in for 10 days from Friday.

Hyundai unveiled two models at the show, an updated version of its H-1 van in both passenger and commercial versions, as well as the FD estate wagon, a product of the company's European Design Center in Russelsheim, Germany.

Both vehicles will start mass production in July, Jang said.

Cho Nam-hong, president and chief executive of Kia, was mum on what strategy his company would pursue regarding the trade deal.

"Every car maker should review (its business plan) according to the FTA," he said. "We will wait and see for now."

Wayne Chumley, president of DaimlerChrysler Korea Ltd., the local arm of DaimlerChrysler AG, said more would be known once the finer points of the agreement emerged.

"We're still waiting to see all the sector details," he said. "We're hopeful."

Grimaldi said free trade in general is good for the auto industry, which he said recorded record sales in 2006 of 67 million vehicles. He added that number is expected to exceed 70 million over the next year.

"It's an exciting time to be part of the auto industry," he said.

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