Hyundai Motor wage deal clears hurdle for new vehicle production

Hyundai Motor’s belated wage deal has removed a major risk to the carmaker’s production of new strategic vehicles, including the Avante, Grandeur and Tucson — three flagship models that will drive the carmaker’s earnings in the latter half of this year.

According to the carmaker, Hyundai Motor’s management and its union reached a tentative wage agreement Tuesday, ending months of labor disputes that had disrupted vehicle production and increased financial pressure on workers and parts suppliers.

The carmaker faced mounting production risks since July, when its union started strikes. Hyundai Motor’s lost sales are estimated to reach more than 1 trillion won ($723.5 million) due to the strike.

However, with both sides compromising to restore normal production operations, the carmaker has avoided a worst-case scenario and cleared one of its biggest risks this year. Hyundai Motor plans to focus on assembling the key highly sought-after models for earnings recovery.

One of the key issues that blocked the timely agreement was the introduction of new technologies, such as physical artificial intelligence (AI) and robotics.

As Hyundai Motor is scheduled to deploy Atlas humanoid robots at its overseas manufacturing facilities, the union has raised concerns about the potential impact of automation on their jobs.

Management, however, emphasized the need to adopt advanced technologies to remain competitive. Under the deal, Hyundai will transparently share progress on new businesses and technologies with the union and work jointly with employees to respond to changes in the manufacturing industry.

To mitigate the lingering job loss concerns, the two sides agreed to create 500 new technical workers over the next two years. They will work at the carmaker’s domestic production lines.

Management and the union also agreed to cooperate on improving labor systems, productivity and manufacturing competitiveness, as Hyundai accelerates its transition toward robotics and other advanced technologies.

The wage package includes a 100,000 won monthly base-pay increase along with performance incentives equivalent to 400 percent of base pay and an additional bonus of 12.7 million won. Workers will also receive 15 shares of Hyundai Motor and 500,000 won in welfare points.

The agreement is expected to reduce uncertainty surrounding Hyundai’s production plans at a critical time when the company faces mounting competition in the global market and is still exposed to a 15-percent tariff risk in the United States.

Hyundai Motor said the company would now focus on production and new vehicle launches and repay customers’ support through globally competitive mobility products.

“We apologize for causing concern in interested parties, including shareholders, customers and parts suppliers, due to the prolonged negotiations and strikes,” an official from the carmaker said.

“As labor and management reached the tentative agreement out of an urgent need to prevent further damage, we will devote all our efforts to second-half new vehicle production and repay our customers’ support by delivering mobility products of the highest global quality.”

Kia, Hyundai Motor Group’s sister automaker, holds its wage negotiations Tuesday afternoon, and the carmaker’s union is also expected to take a similar approach to secure a wage deal with management.