Chairman Prepares to Wade Into Hyundai Union Strife

Hyundai Motor Group Chairman Chung Mong-koo has been released from Severance Hospital in Seoul and, following a 3-day national holiday, immediately will immerse himself in ongoing worker strikes that are crippling company plants, a Hyundai source tells Ward’s.

Hyundai’s unionized plant workers began the partial strikes June 26, seeking higher wages and better working conditions.

The daily 4-hour strikes at Hyundai Motor Co. Ltd.’s Ulsan plant, so far, have cost the auto maker more than 729 billion won ($769 million) in lost production, a company spokesman says. Through July 14, production shortfall totaled 53,155 vehicles, he says.

Union officials recently extended the length of the daily strikes from four hours to six hours per shift and planned to completely shut down operations on all shifts for a full day this week, including sales and maintenance divisions, which would freeze customer delivery of an estimated 2,000-2,500 vehicles.

Chung, who’s first order of business yesterday was to meet with Alabama Gov. Bob Riley in Seoul to discuss ways to cooperate to enhance Hyundai’s Alabama operations, has spent the last two weeks in the hospital after his release last month from the Seoul Detention Center on 1 billion won ($1.1 million) bail.

Before that, he spent two months in solitary confinement on charges he embezzled money from companies within his automotive group and for breach of contract for allegedly causing some of the companies to incur substantial and unnecessary business costs.

Analysts closely observing the case believe the prosecutors’ position against Chung is weakening, especially in light of the substantial threat posed by the current union action against Hyundai. Consideration of Chung’s importance to his group companies and Hyundai Motor’s role as a linchpin in the South Korean economy are among the reasons the court granted Chung bail.

The court also received an estimated 1 million signatures from Hyundai affiliates around the world asking for Chung’s release from jail that included the striking workers at Ulsan.

But that was before Hyundai’s labor union decided to bolt to the often-fiery Federation of Korean Metal Workers, which has the ability to call national strikes involving all of its affiliated unions in a range of industries.

The federation is known for extremely volatile strikes, including near riots in downtown Seoul in 2001 to protest the pending sale of bankrupt Daewoo Motors Co. Ltd. to General Motors Corp.

Hyundai union members voted to break away from the larger, but less-volatile Korean Confederation of Trade Unions June 27. Leading the charge to swap umbrella unions was Hyundai union chairman Park Yoo-ki.

Aligning his 48,000-member union with the metal workers union was the major goal of his election campaign in December. An 18-year veteran activist, he believes a union with nationwide clout is essential in dealing with Hyundai.

The Federation of Korean Metal Workers union now is making a showcase of the Hyundai partial strikes that are crippling production at the Ulsan plant, industry observers say.

The union is demanding a pay conversion from the present hourly pay method to a monthly salary for all of its workers. It also wants a pay increase of 125,524 won ($132) per month, which constitutes a 9.1% increase over the current wage rate.

Hyundai management offered a compromise monthly wage increase of approximately 65,000 won ($69.00), which was rejected by the union. The union also is demanding significant increases in the worker bonus system that would substantially hike their take-home pay.

In response, Hyundai management had laid out internal statistics to union officials to show the company is being drastically impacted by unfavorable foreign exchange rates and record high fuel costs.

Also presented were sensitive internal calculations showing the extent to which Hyundai must make research and development and other investments to stay competitive on a global basis, sources say.

Hyundai analysts say the strike at the Ulsan plant is having an especially harsh impact because Hyundai is relying on the models made there to boost its domestic and overseas sales. That includes the all-new ’07 Avante, which went on sale in Korea June 26 and is sold in the U.S. as the Elantra.

The Hyundai spokesman says there already was a backlog of orders for the all-new compact car and the strike action is increasing the backlog significantly.

A Hyundai spokesman told Ward’s earlier the Avante/Elantra is vital to the company’s new sales projection released this week, which says normalized production will enable it to attain 2006 domestic sales of 650,000 vehicles.

Compounding the labor strife is a similar partial-strike action at affiliate Kia Motors Corp. Workers began partial strikes July 13 and are refusing overtime.

Meanwhile, sources says Chung is expected to give a green light to symbolic groundbreaking ceremonies and other matters connected with the start of construction of a new Hyundai Czech Republic plant and Kia’s first U.S. plant in West Point, GA. Preliminary work has continued at both projects.

Hyundai also has established a new subsidiary in Czech Republic registered in Moravia as Hyundai Motor Manufacturing Czech.