Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Hyundai Motor, GM Korea grappling with 'union risks'
Members of Hyundai Motor union stage a rally at the company's plant in Ulsan, Wednesday, opposing the carmaker's participation in a project to set up a plant and create jobs in Gwangju. / Courtesy of Hyundai Motor union
By Nam Hyun-woo
By Nam Hyun-woo
Hyundai Motor, GM Korea and other carmakers here are scrambling to cope with the deepening “union risks” as unionized workers threaten to strike for higher wages and better working conditions, while the companies also face deteriorating bottom lines.
Company officials and industry analysts say unions have “gone too far” and they are excessively exploiting their right to walk out as a go-to choice to get what they want from management, dragging down companies from making aggressive R&D investments.
According to the Hyundai Motor union, Thursday, it announced a plan to launch an all-out strike if the company agrees to a project to set up a plant and create jobs in Gwangju.
It is a project proposed by the city to spur the local economy by setting up the plant capable of manufacturing 100,000 compact vehicles a year and creating 10,000 to 12,000 jobs.
Those jobs will pay 40 million won ($35,140) in annual salary, which is almost half the average annual salary of five domestic complete carmakers in 2016. Hyundai is supposed to join the project as the second-largest shareholder.
The militant union has been strongly opposing the project saying it is a “wrong investment which will end up extorting other automotive jobs and dragging down workers' wages.”
GM Korea is also making headlines over a dispute with its union as it moves to set up a separate R&D body.
The GM Korea union said Wednesday that it will consider all possible efforts including an all-out strike to deter GM's plan to demerge its Korean unit.
GM Korea says setting up the R&D body will be a technological hub in the region benefiting its ties to Korea, while the union says the move is a prelude to its withdrawal from Korea, by turning the company into an engineering team subcontracting the manufacturing unit. After establishing such a structure, the R&D body can withdraw from Korea more easily, the union claims.
Over their threats, experts say that unions have crossed the line and policy-wise improvements should be made to prevent unions from exploiting their rights.
“What's unique in the labor-management relation in the Korean automobile industry is that labor is attempting to manage the company,” said Kim Phil-soo, a professor at Daelim University's Automotive Engineering Department.
“When an automobile firm tries to make managerial decisions, such as R&D projects, production volume hikes or shifts in manufacturing line, the management has to receive agreement from the union. Under such circumstances, domestic companies have no other option but to keep the wage hike and suffer difficulties in their earnings.”
Hyundai Motor triggered market turmoil by posting 288.9 billion won in operating profit in the third quarter, down 76 percent from a year earlier. Its operating margin shrank to 1.18 percent.
GM Korea is also expected to log disappointing numbers in the third quarter, as its global and domestic sales all plunged in recent months.
“Domestic carmakers make popular cars, whose profitability largely depends on labor costs. If the Korean automobile industry maintains this type of high-cost-low-production structure, the situation will become harsher next year,” Kim said. “The government should understand its labor policies require improvements to enable carmakers to survive.”