Hyundai Motor is having trouble with its car production because of internal conflict within its labor union. In late April, the nation’s largest automaker and the union agreed to restart weekend shifts from May after 14 rounds of negotiations, but some groups in the union opposed the agreement and refused to work on May 4.
This means that Hyundai Motor’s unionized workers have refused to work overtime on weekends since March, when two daytime shifts were introduced. As a result, the world’s fifth largest automobile group failed to manufacture 63,000 vehicles, which cost it 1.3 trillion won in lost production. Due to the production disruption, Hyundai Motor is failing to meet orders for 360,000 vehicles, including 310,000 units for export.
True, this is no time for Hyundai Motor to remain complacent. Leading carmakers from the United States, Europe and Japan have been engaged in unbounded competition to tide over the protracted global economic downturn. Japanese carmakers, in particular, are running at full throttle, buoyed by the yen’s steep devaluation.
All these challenges, however, are barely heeded by Hyundai Motor which recalled 1.87 million cars in the U.S. last month. It’s nothing new to hear that the company’s local plants are notorious for high wages and low productivity, compared with overseas plants. Furthermore, Hyundai Motor’s price competitive edge has been eroded significantly by the falling Japanese currency.
The first-quarter result augurs ill for the automaker’s bleak outlook. In the January-March period, Hyundai Motor’s net profit dipped 15 percent from a year ago though sales rose by 6 percent, as labor disputes over the introduction of a new shift system affected car production. Operating profit also dived 11 percent.
What’s most regrettable is that production disruptions are dealing a fatal blow to Hyundai Motor’s parts suppliers, which have already been adversely hit by the global economic gloom. The company’s union leadership should listen to a petition from representatives of parts suppliers who called for the resumption of weekend overtime work on Wednesday.
It simply defies our understanding that laborers refuse to work because of a factional strife within the union ahead of union leadership elections in September. If this outdated labor practice persists, Hyundai Motor has no other alternative but to reduce domestic production and expand overseas output.
This will be a ruinous situation for both the carmaker and the Korean economy, given that the new administration is giving top priority to job creation. What’s needed now is for Hyundai Motor to act decisively so that it won’t be swayed by the union any longer.