Korean Enterprises Cautious After U.S. Immigration Raid on Hyundai-LG Factory

In a significant move, the United States conducted a large-scale immigration raid on a joint electric battery factory operated by Hyundai Motor Co. and LG Energy Solution Ltd. in Georgia. This action has sparked concerns among Korean enterprises about their planned investments worth tens of billions of dollars in the U.S. Currently, the largest enterprise groups in Korea are taking emergency measures to mitigate the impact of this event.

During a government meeting on Monday, the Korean Minister of Trade, Industry and Energy acknowledged the concerns arising from the immigration crackdown on Korean enterprises investing in the U.S. The minister stated that the government would collaborate with relevant departments, including the Ministry of Foreign Affairs, to explore ways to improve related systems.

The raid, which occurred last week, shocked Korean citizens as footage showed multiple workers being handcuffed at the wrists, waist, and ankles. This operation was part of a broader effort by the U.S. to combat illegal immigration, coming just two weeks after a summit between the leaders of Korea and the U.S., where the alliance between the two countries was emphasized.

During the summit, a trade agreement was announced, which included a 3500 billion dollar fund to support Korean enterprises expanding in the U.S. Additionally, Korean enterprises had independently committed to 1500 billion dollars in direct investment in the U.S. to strengthen trade ties between the two nations.

However, the large-scale immigration enforcement action has made some Korean enterprises cautious. According to a report, LG Energy Solution has tentatively postponed the start of production for the electric vehicle battery factory it is building with Hyundai in Georgia. The report also mentioned that Hyundai has prohibited all employees from traveling to the U.S. for business purposes.

The report indicated that LG Energy Solution had initially planned to commence production later this year, aiming for an annual battery production capacity of 30 gigawatt-hours (GWh). However, the company has now decided to delay the start of production until the first half of next year. This change could affect Hyundai's and its subsidiary Kia Corp.'s production plans.

On Monday, an LG Energy Solution spokesperson stated that due to market environmental factors, the company had postponed the start of production from this year to next year. However, it is still too early to determine if last week's event will impact the factory's operations. When asked about the related reports, spokespersons for Hyundai and Kia stated that it is currently impossible to determine the impact on their business.

In fact, even before the raid last week, some Korean enterprises had become wary. A spokesperson for Samsung Electronics revealed that in May, the company issued internal guidelines for employees using short-term ESTA visas for business trips to the U.S., requiring that their trips not exceed two weeks.

The raid highlighted the risks faced by foreign enterprises that rely on contractors to fill labor gaps while waiting for months to obtain U.S. visas. The chairman of the Korea Chamber of Commerce and SK Group urged the Korean government to secure more U.S. visa quotas to ensure smooth enterprise operations and prevent similar incidents from recurring.

In Seoul, investors initially reacted calmly, with LG Energy Solution and Hyundai's stock prices performing slightly below the market average. Analysts noted that the news of LG Energy Solution's potential production delay had already been fully disclosed, and Hyundai has the flexibility to adjust electric vehicle production and use alternative suppliers. By the end of trading, LG Energy Solution's stock price had risen by 0.2%, while Hyundai's stock price had fallen by 0.7%.

However, some investors expressed growing concerns about the profitability of Korean enterprises investing in the U.S. The chief investment officer of Life Asset Management Inc. stated that this event demonstrates how difficult it has become for Korean enterprises to profit from their investments in the U.S. Inflation has been steadily eroding investment returns, and now enterprises face recruitment challenges.

This high-profile immigration enforcement action was the largest single-site enforcement operation in the history of the U.S. Department of Homeland Security's investigative arm, potentially hindering Korean enterprises' private sector expansion plans.

During a meeting with opposition party leaders in Seoul, the Korean President acknowledged the challenging situation but did not directly address the detention of Korean citizens in the U.S. The President emphasized the need to strengthen national power, a point repeatedly made during summits with the U.S. and Japan.

Early this week, investors will have the opportunity to observe the current state of Korea-U.S. relations. The Korean Minister of Foreign Affairs is expected to depart for Washington on Monday to seek the release of the 300 Korean citizens detained during the raid. A Korean government official revealed that Korea is pushing for a "voluntary departure" arrangement to repatriate its citizens using chartered flights. When asked if they would return to Korea with the 300 detainees on Wednesday, the Minister of Foreign Affairs stated that this possibility is not ruled out, adding that it depends on the progress of the negotiations.

Meanwhile, the urged enterprises to comply with U.S. immigration laws. In a post on the social media platform Truth Social, the encouraged enterprises to bring their highly intelligent and technically skilled talent to the U.S. to create world-class products, assuring them that the process would be fast and legal.

The factory in Georgia is a key facility in the U.S.'s efforts to build a domestic electric vehicle supply chain. Beyond its diplomatic significance, the delay in the factory's production adds new risks for automakers that rely on battery supplies to meet their production goals.

An analyst from Yuanta Securities noted that due to the loss of key personnel during the equipment installation and trial production phases, achieving mass production of electric vehicle batteries by 2026 is no longer possible. The analyst predicted that, given the lack of alternative employee visa solutions, the factory's production start would be delayed by at least a year through diplomatic channels. However, the analyst also stated that, given LG Energy Solution's prior warning about potential production delays, the impact of this event on the company's earnings would be limited.