Renault Samsung faces possible plant shutdown in Sept.

Renault Samsung plant in Busan / Courtesy of Renault Samsung Motors

By Kwak Yeon-soo

Concern is growing over the fate of Renault Samsung Motors as the carmaker may see its main plant in Busan shuttered in September when a contract to manufacture the Nissan Rogue mid-size SUV expires, industry analysts said Wednesday.

It has become increasingly likely that the company will not win new models to assemble from its French headquarters as the affiliate's management and union have continued to fail to reach an agreement on wages and work conditions for the past 11 months.

With the Nissan Rogue, accounting for half of the plant's total output last year, Renault Samsung has to secure new orders and prove its efficiency and productivity to headquarters, but the 11-month-long stalemate has dealt a blow to that.

On Tuesday, of 2,142 union members present for a vote, 51.8 percent cast ballots against a tentative agreement reached last week ― 52.2 percent of 1,662 production workers voted in favor, but 65.6 percent of 442 sales workers voted against it.

The company and the union began negotiations in June last year to sign a wage and collective agreement deal. Following 60 partial strikes, the Korean unit of French automaker Renault halted production at the Busan plant several times resulting in losses.

Declining auto sales and a continuing labor dispute have led Renault and its alliance Nissan to realign production and cancel work orders for the Busan factory.

The number of Nissan Rogues ordered was slashed to 60,000 from last year's 100,000.

As a result, Renault Samsung's sales fell 40 percent to 52,930 vehicles in the January-April period from 87,996 in the same period of last year.

Industry watchers are worried that tension could escalate further and lead to an exit by the French automaker.

“Because management and the union failed to reach an agreement, the sustainability of the entire Korean unit, not just the Busan plant, is in danger. They need to worry about a shutdown,” Kim Pil-soo, an automotive engineering professor at Daelim University, said.

Busan Chamber of Commerce & Industry (BCCI) also released a statement, urging the two sides to return to re-negotiations in order to secure production of the XM3 crossover utility vehicle.

“It's regretful that the deal was rejected after reaching a tentative agreement last week. The protracted standoff could harm parts suppliers in Busan and damage the local economy,” a BCCI official said.

Renault Samsung said it will monitor the union's position and decide on whether to renegotiate.

“We won't make an official statement until the union makes its stance known. No further schedule for renegotiations has been set,” a company official said.

“However, the results of voting were meaningful in that the majority of production workers voted for the deal. It was the sales union, which voted against the collective agreement. They must have had some internal conflict with executives,” the official said.