By Lee Hyo-sik
An all-out strike by unionized workers crippled Hyundai Motor’s operations here, Monday, incurring tens of millions of dollars in lost production and tarnishing its corporate image.
This is the first time in 12 years that Korea’s largest carmaker has faced a full-scale walkout; one that paralyzed its domestic plants in Ulsan, Asan and Jeonju.
It is feared that Hyundai won’t be able to meet market expectations in the second half of 2016, amid deteriorating business conditions here and abroad, if labor and management fail to conclude wage negotiations soon, analysts said.
The union at Hyundai Motor staged a one-day, full-fledged strike at all plants, pressing the company to offer more concessions.
Prior to the latest strike, the union staged partial walkouts 19 times this year, disrupting the production of 101,400 vehicles at the carmaker’s domestic plants and incurring 2.23 trillion won ($2 billion) in lost sales.
Union members also plan to hold partial walkouts Tuesday to Friday, suspending Hyundai’s domestic operations for six hours every day.
In late August, the company’s union and management reached a collective bargaining agreement under which the company will raise the base monthly salary by 58,000 won, increase annual bonuses by 350 percent and offer a 3.3 million won one-time bonus, among others.
But workers voted down the agreement, sending wage negotiations back to square one. Union leaders then asked the company for more concessions, which management refused.
“Labor and management ironed out a consensus after undergoing a prolonged, painstaking process,” a Hyundai Motor official said. “Union workers should honor the agreement signed by their leaders. Internal conflict among union members led to the rejection, not the lack of our concessions. We believe that, before labor and management resume negotiations, the union should get its own house in order first.”
The escalating labor unrest is widely expected to hurt Hyundai’s performance in the second half of the year. The firm earned 47 trillion won in sales in the first six months of the year, up 7.5 percent, but its operating profit fell 7 percent to 3.1 trillion won.
Production disruptions caused by frequent strikes will make it harder for the company to deliver vehicles to consumers in a timely manner, while it becomes more difficult to sell cars amid the continued domestic consumption slump.
With Hyundai struggling to churn out as many vehicles as it should, Korea has lost its status as one of the world’s top five car producers, according to the Korea Automobile Manufacturers Association (KAMA).
The country’s five car producers — Hyundai, Kia, GM Korea, Renault Samsung and Ssangyong — manufactured a combined 2.55 million passenger and commercial vehicles in the first seven months of the year, the sixth-largest in the world.
In 2015, Korea was the fifth-largest car-producing nation at 4.55 million cars, compared with India’s 4.12 million. But so far this year India is outperforming Korea, making 2.57 million cars during the January-to-July period.
Asia’s fourth-largest economy will likely be overtaken by Mexico and other competing nations in the coming years as local carmakers refrain from expanding production in Korea. Instead, Hyundai and Kia have been rushing to build plants overseas to take advantage of incentives such as lower labor costs and taxes, while GM and Renault Samsung import cars from their foreign affiliates rather than produce them here.
“There is no reason whatsoever for Hyundai and other carmakers to expand production in Korea. I don’t even have to say why that is,” the Hyundai official said. “Kia just opened a plant in Mexico and we will also open two new plants in China over the next year.”