Trump's Trade War Forces Volvo To Shift Gears In South Carolina

6 hours ago
Originally published on April 16, 2019 6:27 pm

Volvo is a Chinese-owned Swedish company making cars in the U.S. When it decided to set up a plant in South Carolina to build cars to ship around the world, it was following a long tradition.

With its port, Charleston, S.C., has been a shipping hub for centuries. And the state has been home to international manufacturers for decades — BMW, Michelin and Bosch are among the many global firms with footholds there.

But before the plant opened last year, President Trump transformed America's approach to trade policy.

Trump's trade war with China has stretched for more than a year, and trade tensions remain high with Europe as well. Tariffs on steel and aluminum are pinching auto suppliers in the U.S., who face higher costs for raw materials to make parts. Meanwhile, tariffs on imported parts can cut into the budgets of automakers, who rely on thousands of different components from around the world to build each vehicle.

Volvo, owned by the Chinese firm Geely, intended to export many cars from the plant near Charleston to China, but the tit-for-tat tariffs between Beijing and Washington threw a wrench into those finely tuned plans. U.S.-made Volvos aren't being sent to China after all.

"It's kind of a disappointment, but we're going to work through it," says Trey Yonce, a supervisor at the plant, as he watches line workers assemble cars. "It wasn't what we wanted to hear."

But as Yonce notes, Volvo is adapting, not cutting back.

Analysts compare imposing tariffs to squeezing on a balloon. Put pressure in one spot and the global economy will shift to work around it.

Volvo's new $1.1 billion plant in Ridgeville employs 1,500 people and is currently running at a fraction of its capacity
Camila Domonoske / NPR

Volvo's new $1.1 billion plant in Ridgeville, S.C., employs 1,500 people. It's currently running at a fraction of its capacity, manufacturing the S60, a luxury sedan. But Volvo has certainly not stopped production because of tariffs. In fact, the company is still planning to add an SUV to the plant in the next few years.

And half the cars made in the facility are still being exported — just not to China. A batch recently went to Belgium, for distribution across Europe. In coming months, Volvo says, it will ship cars to countries in the Middle East, Africa, Oceania and the Asia Pacific region — excluding China, of course.

The plant was designed to be flexible, handling gas engines, hybrids and eventually electric vehicles on the same line. Volvo has had to be flexible about where it builds cars and for which markets, too.

"We need to be able to change our manufacturing capabilities very fast," says Anders Gustafsson, Volvo Cars' vice president for the Americas and the CEO of Volvo Car USA. "We are fast, but it's not easy."

But he takes the long view.

"To run a plant or run a company, it's a long-term decision," Gustafsson says. "So you lose and you win."

Across the entire industry, automakers are stuck waiting to see how the trade conflicts will pan out, says labor and manufacturing expert Kristin Dziczek of the Center for Automotive Research.

"Essential investments are getting made," she says. "Strategic investments are waiting to find out what the rules of the game [are] going to be."

And it's not just the car industry grappling with the unpredictable nature of these trade talks.

"I think that every industry has got some some skin in the game or some things that get messed up when trade becomes uncertain," she says.

Jim Newsome, the CEO of the South Carolina Ports Authority, notes that his state depends heavily on global trade. "We ought to be trying to lower tariffs, not raise tariffs," he says. "The global automotive industry could benefit from zero tariffs."

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South Korea has enjoyed tremendous success exporting its modern culture, especially so-called K-pop music. But that industry is now facing its biggest crisis to date - a lurid scandal involving sexual violence and official corruption. As NPR's Anthony Kuhn reports from Seoul, the problems behind the scandal are deep-rooted.

ANTHONY KUHN, BYLINE: Twenty-eight-year-old Lee Seung-hyun, stage name Seungri, was the youngest member of Big Bang, the boy band that helped K-pop take off. He was also an aspiring actor, a suit-and-tie-wearing proprietor of a noodle shop franchise, nightclubs and music and dance schools. Here's one of his hits from 2008.

(SOUNDBITE OF SONG, "STRONG BABY")

SEUNGRI: (Singing) Hey, sexy. Crack, crack...

KUHN: He is now under investigation for procuring prostitutes for investors at a nightclub in Seoul's posh Gangnam district. He's also been charged with embezzlement and tax evasion. And he was allegedly in an online chat group with another celebrity named Jung Joon-young, who has been accused of sharing around a dozen secretly filmed sex videos. A whistleblower got hold of these videos along with evidence of police collusion and reported them to authorities through an attorney named Bang Jeong-hyun. In an interview, Bang says the evidence points to a mafia-like enterprise involving K-pop stars, club owners and police.

(SOUNDBITE OF ARCHIVED RECORDING)

JEONG-HYUN BANG: (Through interpreter) The collusion with public authority, especially the police, was not a single incident. The police had their backs frequently and in close coordination for their criminal activities and business operations.

KUHN: Five K-pop stars and six police officers have been charged so far in the case. Seungri has apologized, retired from the K-pop business and says he intends to clear his name. President Moon Jae-in weighed in last month, saying that if the truth is not revealed, we cannot say it's a just society. Women's rights groups, meanwhile, have denounced the whole K-pop establishment. Kim Soo-hee is director of the Seoul-based coalition Korea Women's Associations United.

SOO-HEE KIM: (Through interpreter) As the scandal unfolded, we realized there is a whole industry that routinely objectifies women's bodies with drugging, rape, sexual assault and sexual bribery and that the law enforcement agencies that should punish those crimes are, in fact, part of it.

KUHN: Despite the outrage among some Korean women, none of South Korea's popular girl groups have voiced their opinions on the scandal. Then again, says Choi Ji-eun, a Seoul-based journalist who has covered K-pop, Korean society does not welcome female celebrities who speak out on political and social issues.

JI-EUN CHOI: (Through interpreter) We cannot really burden them with the duty to speak up because it's extremely difficult for them to do so. But I am hoping that, as fellow citizens, that they can contribute to solidarity.

KUHN: Shareholders have threatened to sue Seungri's record label YG Entertainment for immoral conduct. Author Joo Won-kyu finds such views ironic. He went undercover in the nightclubs of Gangnam in order to write about them. He argues that South Koreans expectations of celebrities set them up to be disillusioned.

WON-KYU JOO: (Through interpreter) On the one hand, they expect a very high level of morality from K-pop stars. They're very conservative about the stars' romantic relationships. On the other, there's an expectation that if you make it as a K-pop star, then you can be forgiven for any kind of behavior.

KUHN: However society may judge Seungri, he reportedly faces up to three years in jail if convicted.

Anthony Kuhn, NPR News, Seoul. Transcript provided by NPR, Copyright NPR.