Contentious Labor Talks Complicate Hyundai’s Plight

The negotiating teams of Hyundai Motor and its labor union are working to resolve the union’s wage and working conditions demands by July 28, although the automaker has called them excessive and impossible to meet.

Most analysts expect the process to drag on into August, as it appears both sides currently are at an impasse. A dramatic breakthrough cannot be ruled out.

Hyundai’s first-half results released Wednesday, July 26, show the automaker’s claims of financial difficulty are not a red herring.

Hyundai revealed its global sales for the first six months of 2017 were down 8.2%, with 2.2 million units sold in all markets. By omitting poor China sales, the automaker says, the tally would be 1.9 million units, an increase of 1.5%.

Domestic sales were off 1.8% at 344,130 units.

Hyundai’s first-half operating profit plunged 16.4% year-on-year to 2.6 trillion won ($2.3 billion) and net profit plunged 34% to 2.3 trillion won ($2.1 billion) compared with 3.5 trillion won ($3.2 billion) earned in like-2016. The sharp profit declines occurred even while total revenue for first-half 2017 was up 1.4% at 2.3 trillion won.

Apparently anticipating release of these unfavorable numbers, the president of the Hyundai branch of the Korean Metal Workers Union said July 18 his bargaining team had decided not to announce plans to use strike action to force management to grant its wage demands, despite having received rank-and-file approval to do so.

Instead, the union announced it will continue negotiating without threatened strike action in an effort to reach a tentative agreement by Friday, July 28, when Hyundai and all other corporations in Korea begin their annual 2-week vacation.

However, the union has shown no sign of backing down from its 154,883 won ($138) monthly wage-increase demand, coupled with a bonus of 30% of 2016 net profits shared among workers.

Additionally, the union is not giving up its quest to force Hyundai to put all workers on a monthly salary instead of the current hourly wage system, and it is not dropping its demand to change the current 8/9-hour 2-shift work system to an 8/8 hour system.

Talks Likely to Resume in August

It is doubtful an agreement will be made before July 28, in which case union spokesmen say bargainers will reconvene Aug. 7 to decide how to proceed, including possible strike action.

Many analysts believe a strike is probable, given the union’s non-wage demands seem inflexible and KMWU officials believe the climate for winning worker demands is favorable under the administration of Korea’s new left-leaning President Moon Jae-in.

The analysts also believe Hyundai is sincere when it says the union’s wage demands are excessive and cannot be met. Hyundai is offering something around half of what the union wants in the way of a monthly wage increase, and a flat bonus payment that is far less than a pro-rated 30% share of 2016 net income.

Analysts also believe the union officials decided not to announce strike action plans because of concerns about negative public reaction. Virtually every major newspaper in Korea has published editorials decrying excessive union demands in light of Hyundai Motor’s the current plight.

Some analysts note that when 65.9% of Hyundai workers who voted July 14 authorized the union to call a strike, it was the lowest percentage in favor of a strike in all such votes held during the past decade.

They believe this reflects the workers’ own concerns about the automaker’s financial situation as well as their knowledge of the country’s generally poor economic situation.

Workers themselves suffered wage declines last year when the union called partial strikes 24 times and refused weekend overtime 12 times in succession during the protracted negotiating period. The hourly workers are not compensated for missing work when a plant is shut down by a strike.

Under the salary system the union is demanding workers would receive their full monthly wages regardless of the number of hours they worked. Whether this would apply to lost production time caused by strikes is not clear.

What is clear is Hyundai’s dire predicament. Hyundai says first-half retail sales were down 1.7% in Korea with 344,000 units sold, off 28.8% in China with 361,000 units sold, and off 7.4% in the U.S. with 346,000 units sold.

The company hopes the release of its new compact CUV, the Kona, in the U.S. and Europe in the second half will give push sales upward.