It's time for pushing labor reform once again
It is likely that Korea will cede its status as the world's fifth-biggest carmaker to India this year. According to the Korea Automobile Manufacturers Association (KAMA), Korea produced about 2.55 million cars in the first seven months of the year. India's car output, in contrast, surpassed 2.57 million.
It is the first time in 12 years that Korea has lost the No.5 spot in car production. Last year, Korea's annual output reached 4.55 million cars, compared with India's 4.12 million.
The prospects for the rest of the year are not bright, either, because Korea's car exports declined 14.3 percent in the January-August period and tax incentives for new car purchases expired in June. Moreover, labor strikes have hit major local car manufacturers.
To make matters worse, Mexico, ranked seventh globally, is in hot pursuit of Korea as the world's leading carmakers rush to relocate their plants there.
Against this gloomy backdrop, one may well worry that the country's car industry might be sandwiched between industrialized nations and emerging economies. Not surprisingly, it's not easy to catch up with the United States, Germany and Japan in technology and productivity and head off challenges from China and India.
It might be premature of course if you say that the Korean car industry is in crisis only with a short-term slowdown in car production. Hyundai Motor Group, however, which owns both Hyundai Motor and Kia Motors, sold 8 million cars around the world last year as part of the global "Big 5" makers following Toyota, Volkswagen, General Motors and Renault-Nissan. By contrast, China ranked first in car output with nearly 25 million cars last year but is devoid of its own strong brand.
However, given the car industry's far-reaching impact on other industries and its ripple effect on employment and exports, it's urgent to map out countermeasures. This isn't something taken lightly, considering that as domestic production facilities go abroad, the fewer domestic jobs become. Hyundai and Kia assembled nearly 55 percent of their cars abroad last year, and if such production facilities had been at home, their contribution to employment would have been enormous.
Admittedly, one can recognize the need to build car plants overseas because of the problem of market access. But the government and the car industry should work together to create more jobs by luring relocated car factories back home.
The biggest problem is that Korean carmakers are notorious for high costs and low efficiency. For example, wages at the nation's five carmakers boast a world-class level with their average annual salary reaching 93 million won. But their productivity is among the lowest in the world.
On Monday, union workers of Hyundai Motor went on their first full strike in 12 years after rejecting an earlier compromise on wage increases. Whether to go on strike is certainly a matter of choice by unionists. But it's hard to expect the nation's largest carmaker to maintain its competitive edge at a time when labor-management relations are shaky. Certainly, it's time to step up efforts to reform the labor sector once again.
It is likely that Korea will cede its status as the world's fifth-biggest carmaker to India this year. According to the Korea Automobile Manufacturers Association (KAMA), Korea produced about 2.55 million cars in the first seven months of the year. India's car output, in contrast, surpassed 2.57 million.
It is the first time in 12 years that Korea has lost the No.5 spot in car production. Last year, Korea's annual output reached 4.55 million cars, compared with India's 4.12 million.
The prospects for the rest of the year are not bright, either, because Korea's car exports declined 14.3 percent in the January-August period and tax incentives for new car purchases expired in June. Moreover, labor strikes have hit major local car manufacturers.
To make matters worse, Mexico, ranked seventh globally, is in hot pursuit of Korea as the world's leading carmakers rush to relocate their plants there.
Against this gloomy backdrop, one may well worry that the country's car industry might be sandwiched between industrialized nations and emerging economies. Not surprisingly, it's not easy to catch up with the United States, Germany and Japan in technology and productivity and head off challenges from China and India.
It might be premature of course if you say that the Korean car industry is in crisis only with a short-term slowdown in car production. Hyundai Motor Group, however, which owns both Hyundai Motor and Kia Motors, sold 8 million cars around the world last year as part of the global "Big 5" makers following Toyota, Volkswagen, General Motors and Renault-Nissan. By contrast, China ranked first in car output with nearly 25 million cars last year but is devoid of its own strong brand.
However, given the car industry's far-reaching impact on other industries and its ripple effect on employment and exports, it's urgent to map out countermeasures. This isn't something taken lightly, considering that as domestic production facilities go abroad, the fewer domestic jobs become. Hyundai and Kia assembled nearly 55 percent of their cars abroad last year, and if such production facilities had been at home, their contribution to employment would have been enormous.
Admittedly, one can recognize the need to build car plants overseas because of the problem of market access. But the government and the car industry should work together to create more jobs by luring relocated car factories back home.
The biggest problem is that Korean carmakers are notorious for high costs and low efficiency. For example, wages at the nation's five carmakers boast a world-class level with their average annual salary reaching 93 million won. But their productivity is among the lowest in the world.
On Monday, union workers of Hyundai Motor went on their first full strike in 12 years after rejecting an earlier compromise on wage increases. Whether to go on strike is certainly a matter of choice by unionists. But it's hard to expect the nation's largest carmaker to maintain its competitive edge at a time when labor-management relations are shaky. Certainly, it's time to step up efforts to reform the labor sector once again.
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