Hyundai Motor, GM Korea face union tensions amid US tariff risks

Headquarters of Hyundai Motor and Kia in Seoul / Courtesy of Hyundai Motor Group

Hyundai Motor and General Motors (GM) Korea are grappling with escalating demands from labor unions for substantial wage increases, compounding challenges posed by auto tariffs from the United States.

Unions at both automakers are pressing for significant portions of company profits to be distributed as bonuses, despite mounting business uncertainties stemming from U.S. President Donald Trump's push for a 25 percent tariff on automobile imports.

Hyundai Motor’s labor union is demanding that 30 percent of the company’s 2024 net profit be paid as a special bonus to union members — an estimated 4 trillion won ($2.9 billion). However, the likelihood of the automaker accepting the demand appears slim, as the company faces growing external risks from potential tariffs. The U.S. accounted for 54 percent of Hyundai’s total exports last year.

On Tuesday, Hyundai Motor reported a 1.7 percent decline in sales for May compared to the same period last year, attributing the drop to weaker consumer spending amid an economic slowdown. Hyundai sold 351,174 vehicles last month, down from 357,099 units a year earlier.

Union members from GM Korea stage a protest at its manufacturing facility in Bupyeong, Incheon, in this undated file photo. Yonhap

GM Korea is facing similar tensions from its labor union.

The union is calling for 15 percent of the company’s net profit to be paid as incentives, on top of an additional bonus equivalent to 500 percent of monthly wages.

The company, which exports more than 80 percent of its locally produced vehicles to the U.S., recently sold off part of its assets to shore up profitability. The carmaker is also mired in controversy over its possible exit from the Korean market, although the company still denies all such rumors.

Coupled with Hyundai Motor and Kia, GM Korea is also highly vulnerable to the proposed U.S. tariffs.

Also on Tuesday, GM Korea said its sales fell 1.8 percent from a year earlier in May on a sharp drop in domestic demand. The company sold 50,029 vehicles last month, down from 50,924 units in the same period last year.

These demands come at a critical time when local carmakers are hit by a decrease in exports.

Korea’s automobile exports to the U.S. plunged 32 percent in May, compared to a year earlier, according to data from the Ministry of Trade, Industry and Energy. A quick recovery appears unlikely amid protracted trade talks between Seoul and Washington.

“The dual pressure from the domestic labor disputes and external trade threats will continue to cloud the business outlook for carmakers in not just earnings, but future strategy-setting,” an official from the auto industry said.

Market watchers warn that the proposed tariffs could significantly weaken the automaker’s earnings unless the Korean government achieves meaningful progress in ongoing trade negotiations with Washington.

“Labor unions in the nation’s automotive and manufacturing sectors should reconsider excessive demands in light of heightened external trade risks,” said an industry official.

“Companies must tighten spending amid these uncertainties. Continued pressure from unions could make it difficult for export-reliant firms to achieve sustainable growth.”