Assembly Lines Moving as Hyundai Wage Talks Drag On

Hyundai plants in Korea are operating on regular daily production schedules but management and negotiators for the Korea Metal Workers Union remain far apart on reaching a new wage agreement.

While neither side is discussing details, a Hyundai spokesman tells WardsAuto: “A wage agreement has not been reached yet. It seems that it will take some time to get there.”

The length of talks that are in their fifth month is unprecedented, and the two sides now are in a situation where the 2014 wage agreement has expired. It was approved by the union Oct. 1, 2014, and signed soon after the ratification vote was held.

The Hyundai spokesman says there have been 28 formal meetings since negotiations began June 2, with the last meeting held Sept. 22. That is the date on which union sources say management made a second wage-increase offer after the first was rejected a week earlier.

The second offer also was rejected and workers staged partial strikes over the next three days, costing Hyundai 10,900 units of production worth some 230 billion won ($201 million).

Following the partial walkouts Sept. 23-25, workers went on the annual Chuseok Thanksgiving holiday Sept. 26-29, resuming regular shifts Sept. 30. Union officials met Oct. 1 to discuss a new strategy for pressuring management, but decided to continue negotiating without strike action.

The union seeks a monthly wage increase of 159,900 won ($140) and bonuses equal to 30% of Hyundai’s 2014 net income and based on each employee’s length of service. Hyundai’s latest offer, which union officials say is good enough to forestall strike action, includes a 98,000-won ($84) monthly salary increase, a one-time bonus of 8.9 million won ($7,600) and an additional bonus of 4.5 months’ salary.

Age-Old Conflict

However, the union is not willing to give in on its demand to increase the worker retirement age from 58 to 65, while the company will not budge in its offer to extend the age from 58 to 60.

Under direction of the KMWU hierarchy, the union’s Hyundai bargainers also reject management’s demand to initiate a wage-peak system in 2016, under which worker salaries would be reduced when they reach a certain age.

Hyundai management wishes to begin implementing a 10% wage reduction at age 58, reallocating the funds saved to hire younger workers. The union scoffs at that plan, saying any money saved would go to Hyundai’s bottom line.

Of greater concern to the union is Hyundai’s demand to change the present seniority-based wage system to one that is based on merit. The union firmly rejected that stipulation when it first was raised earlier this year.

Currently, Hyundai workers receive annual incremental wage increases based on their years of service. The longer the worker has held his job, the greater each annual increase.

Critics say that wage disparity under the seniority-based system is the reason productivity in Hyundai’s Korean plants is less than that in U.S. and other production locations. They say a worker at a Hyundai plant in Korea who is in his late 50s likely is less productive than a counterpart in his early 20s, but in many cases the older worker is earning up to three times as much as the younger worker who is in his first year as a fulltime employee.

Both Hyundai and its Kia affiliate are holdouts against the wage-peak system, which is being pushed by the Korean government.

Contrary to predictions of many analysts and earlier union-saber rattling, the assembly lines continue rolling at optimal levels at Hyundai’s five plants in the Ulsan production complex and its plants in Asan and Jeonju.

Kia has refused to make even the most basic comment about its wage negotiations, which did not start until after the regular annual vacation period of Aug. 3-7. The Kia Branch of the KMWU voted to strike Sept. 16 after an impasse in negotiations was declared, but no strike action  materialized.

The initial demands of the union’s Kia bargainers were identical to those of their Hyundai counterparts.

Kia’s plants in Sohari, Hwasung, Gwangju and Seosan all are operating on regular schedules; the automaker has not lost one hour of production since wage talks began.

The GM Korea branch of the KMWU accepted the merit-based wage-peak system when workers ratified a new pay agreement on July 27. Workers at Ssangyong and Renault Samsung that month also ratified new agreements including a wage-peak formula.