Political agenda of 'aristocratic' labor union

The haves: Representatives of Hyundai Motor labor union’s subcommittees meet at a convention held in Ulsan, May 6. The union has about 490 representatives who wield much power at plants by deciding how many cars to produce per hour and whether to operate assembly lines on weekends or not. Many representatives are affiliated with political factions within the union. / Yonhap

• Published May 12, 2013 2:24 PM KST
• Updated May 12, 2013 2:24 PM KST

Why Hyundai Motor’s assembly lines have stopped 10 consecutive weekends, failing to produce 70,000 vehicles worth 1.4 trillion won

By Kim Da-ye

Hyundai Motor is facing a problem in overseas markets that other automotive makers would be envious of — a shortage of vehicles to sell.

“There is a lot of interest in Hyundai vehicles, but customers are being forced to wait for a long time,” said a salesman at Allen Briggs, a London-based dealer of Hyundai Motor, in a phone interview. He added that the wait is particularly lengthy for top-of-the-range models, including the newly released Santa Fe sports utility vehicle.

The SUV model is manufactured in Korea, and the salesman said it takes four to five months to get it delivered. Delivery normally takes only a month or two from the point of order.

The salesman said that the shortage means the dealer loses business. “You know, it’s a supply and demand market,” he said. “If we can supply, there will demand and people will buy. But these days people don’t want to wait.”

However, Hyundai Motor is frustrated — it could reduce back orders and meet demand if only the labor union of the assembly-line workers were more cooperative.

The assembly lines in Ulsan, Hyundai’s main production site in southern Korea, have stopped operating for 10 consecutive weekends, initially because of the disagreement between the company and the labor union on the pay and working conditions for weekend shifts, and now because of a similar dispute within the labor union.

The automotive firm estimates that during the last 10 weekends, 70,000 vehicles worth nearly 1.4 trillion won could have been manufactured and sold. Back orders are piling up at home and abroad. As of last week, they totaled more than 370,000 vehicles, about 320,000 of which are for overseas markets. The firm’s operating profit dropped 10.7 percent in the first quarter from a year ago because of the decrease in production and increase in sales costs due to the weaker Korean won.

Labor-management relations have long plagued Korea’s largest automotive maker, and the company has increasingly conceded to production workers’ demands. For example, Hyundai vowed last August to hire 3,000 of 8,000 contract workers as permanent employees by 2016, after an uprising by contract workers who demanded greater job security.

Despite the concessions Hyundai has offered, working with the union of permanent employees remains a tortuous path. The latest negotiations over weekend shift premiums show that better-than-industry-average pay and improved working conditions aren’t enough to appease the militant union. It revealed that the company actually has little control over labor-management relations because of the politics within the gigantic, powerful body, which has some 45,000 members.

Abolishing late-night shifts

The most recent dispute originates from the abolishment of late-night shifts at assembly lines.

From 1967, when the Ulsan plants started operating, until March this year, assembly-line workers ran on two-shift rosters. The first team worked 10 hours and took a break for an hour between 8 a.m. and 6:50 p.m., and the second team worked at night between 9 p.m. and 8 a.m. Each shift included two hours of overtime.

Late-night working hours were criticized for creating irregular lifestyles and deterioration in health among workers. The company and the labor union came to an agreement last August to put an end to the system, which was also perceived to be highly inefficient.

Under the new system that came into effect in March, the first shift begins at 6:40 a.m. and ends at 3:20 p.m., a total of eight working hours, and the second group starts immediately after the first, at 3:20 p.m., and finishes at 1:10 a.m. The second group works nine hours, including one hour of overtime.

As daily working hours decreased three hours, from 20 to 17, the company vowed to invest 300 billion won into facilities to maintain productivity. At the same time, it promised the labor union to keep the same wages, including premiums for late-night working hours. In return, the labor union agreed to boost efficiency and produce as many vehicles as before.

The agreement seemed a win-win solution for the company and the union, but one area remained a blind spot — the pay and working conditions for weekend shifts.

A weekend shift was traditionally done by one team, not two. It started at 5 p.m. on Saturday and finished at 8 a.m. on Sunday: 14 working hours, plus a one-hour break. The absurd working hours were chosen in order to maximize premium pay for assembly-line workers.

Under the labor law, workers get paid an additional 50 percent of their wage when working for eight hours on weekends and holidays. When they work more than eight hours, employers have to pay another 50 percent. Furthermore, if they work past 10 p.m., they are eligible for another 50 percent increase as a shift premium.

In the case of Hyundai’s assembly lines, workers were paid the extra 50 percent between 5 and 10 p.m. Once the clock passed 10 p.m., they got another 50 percent. When the working hours exceed eight hours by 2 a.m., they were eligible for another 50 percent. On the top of the 150 percent extra between 2 a.m. and 6 a.m., the company had, in the past, agreed to give 100 percent of wages as a shift premium, making it 250 percent extra. Between 6 a.m. and 8 a.m., the figure comes back down to 200 percent. The formula resulted in a payment of 315,000 won ($290) per shift on weekends.

Under the new shift system, the company demanded that the weekday system of an eight-hour shift plus a nine-hour shift replace the 14-hour overnight shift. The first team would thus be paid 113,000 won and the second 167,000 won. Not only is the total wage of 280,000 won less than 315,000 won; it is also shared by two people.

Agreement on wages

Until April 26, assembly-line workers refused to work on weekends because the company and the labor union had not reached an agreement on to what extent the company was going to make up for reduced working hours of a weekend shift.

The company’s stance was that employees now worked fewer hours and could properly enjoy the weekend. The labor union argued that they now had to work on weekends as hard as they did on weekdays, so the company had to match the increased productivity.

In fact, the handsome pay isn’t everything assembly-line workers benefit from by working on weekends. The production line moves slower on weekends than on weekdays, reducing the number of units produced per hour by up to 30 percent.

In addition, assembly lines operate according to demand, so those at busy lines could invite other union members from different assembly lines and help them get paid. One external member was allowed per three workers.

The company demanded that these two customs, which the union calls “vested rights,” be abolished under the new system, according to a newsletter by a subcommittee of the union. The assembly lines had previously produced 4,700 vehicles per weekend. The company now requested the number to be 6,900.

For improved efficiency, the management suggested paying premiums, making a total payment of 420,000 won, or 210,000 won per person. The labor union asked for 460,000 won. On Apr. 26, the management and the executive body of the union agreed on 450,000 won for 17 hours of work by two teams.

The agreement was largely criticized by the public and the media for being too generous toward the union, which was dubbed an “aristocratic labor union.”

The local media reported in April that Hyundai Motor Group Chairman Chung Mong-koo ordered the company to decrease domestic production and boost overseas manufacture. Earlier this month, the company also brought back Yoon Yeo-chul, the retired labor-relations expert, as the vice chairman.

Now a political matter

Following the agreement on the weekend shift premium, the assembly line was scheduled to resume operations on Saturday, May 4, but it never happened.

The dispute is now seen as purely political.

The labor union is officially a branch of the Korean Metal Workers’ Union, a militant trade union active within Hyundai Motor.

Although it appears to be led by the executive body and the leader, Moon Yong-moon, the labor union is a massive organization with many subcommittees and political factions.

There are nine committees in Ulsan and six others across the country, including one that represents employees of the R&D center in Namyang, Gyeonggi Province.

Each plant has its own committee and representatives, who wield much power by deciding the number of vehicles to be produced in a day and whether or not the assembly line will run on the weekend. On May 4, the representatives of the first and third plants decided not to work because they did not agree with the decision of the executive body led by Moon. On Apr. 29, the representative and union members of the first plant went on a brief strike, throwing eggs at the plant building. The company said that the incident caused the missed production of 300 vehicles worth 3.9 billion won.

What complicates the matter is that the representatives belong to different political factions within the union and will compete against each other and against members of the executive body in the upcoming union leadership election this September.

According to an industry source close to the matter, there are seven major political factions within the union, including the Metal Worker Democratic Solidarity and the Metal Democratic Worker Struggle Committee.

Ambitious factions tend to become militant in order to win members’ support. They attempt to smear the executive body, with the aim of seizing power in the upcoming election.

The election is similar to a political election. For example, Moon, the current leader, comes from a faction called Minju Hyunjang, and he had a unified candidacy with another major faction in the 2011 election.

Being a union leader is attractive for several reasons. The leader represents some 45,000 union members and manages the union dues — more than 20 billion won is collected in a year. The leader also communicates face to face with high-level executives of the management as well as local politicians and municipal government officials.

Some former union leaders have entered politics. For example, Lee Kyung-hoon, the former labor union leader, who served between 2009 and 2011, ran for a National Assembly seat representing a district in Ulsan, last year.

“When a faction’s nominee gets elected as the union leader, the benefits for that faction are substantial,” said the industry source.

“The labor union activities at Hyundai can no longer be considered as a pure labor movement. For a long time, it has been a huge political arena.”

Risks to Hyundai Motor

It remains unclear when the assembly lines will operate again on weekends. The representatives of the committees held a convention last week. The labor union also announced last Tuesday that it would seek to extend the retirement age to 61 from 60, raising the tension between the company and the union even further.

Korea’s exports of vehicles decreased 2.5 percent in April from a year ago, according to the Ministry of Trade, Industry and Energy. Although the weaker Japanese yen appears to be the major factor for the slowdown of the Korean automotive industry, industry experts and government officials said that the decline was largely caused by a lack of production at Hyundai Motor on weekends.

There is increasing concern over the impact of the refusal to work weekend shifts. Orders for Hyundai and Kia vehicles are being cancelled while foreign automotive makers, especially Japanese counterparts, are becoming more aggressive in Korea than ever on the back of the weaker yen.

The situation at Hyundai is in stark contrast to what other domestic automotive makers are experiencing.

GM Korea has occasionally stopped operating the plant in Gunsan, North Jeolla Province, because exports dropped due to the sluggish European economy. The plant will be closed for six days this month, and was closed for nine days in April.

Renault Samsung Motors’ Busan plant also frequently rests because the company cannot sell as many vehicles as it can produce.