Hyundai’s Korean Workers’ Union Seeks Arbitration

The union representing Hyundai workers in Korea sues for arbitration after completing 22 rounds of wage negotiations without reaching an agreement.

Unionists tell WardsAuto the Hyundai Branch of the Korea Metal Workers Union has filed the arbitration application with the National Labor Relation Commission.

During the requested 10-day arbitration period the union will ask its members to vote on approving strike action.

Both sides seem far apart, despite having been in meetings for more than two months.

Hyundai presented a plan to adopt a wage-peak system in a meeting before last month’s weeklong vacation shutdown. The union rejected it and refused to consider including the proposal in further talks.

The wage-peak system would enable Hyundai to begin reducing a worker’s wages as he approached his year of retirement, lowering the automaker’s overall labor costs and ostensibly making it easier to hire new, younger employees.

Under the present seniority system, workers continue to receive continuous wage increases based on years of service until they retire.

The new wage system is part of the labor-market reform program of the administration of President Park Geun-hye and is being adopted by all state-owned companies. The administration has asked all manufacturing companies to adopt the system as well. The National Assembly has approved legislation encouraging but not requiring manufacturers to comply with the request.

Labor Minister Lee Ki-kwon has said the annual salary of workers at Hyundai and sister company Kia is between 94 million won and 97 million won ($78,700-$81,200). He recently told reporters the automakers’ wages exceed per-capita gross national income by a factor of 3.3.

Korea Automobile Manufacturers Assn. calculations set the average wage paid at Korea’s five automotive companies – Hyundai, Kia, GM Korea, Renault Samsung and Ssangyong – at 92.3 million won ($77,240).

Association data shows the time required to produce a Hyundai vehicle (HPV) in its Korean plants as of June was 26.8 hours, compared with 25 hours in Turkey, 20.7 in India, 17.7 in China, 15.3 in Czech Republic and 14.7 in the U.S.

Analysts note there is disparity between Hyundai’s HPV figures in Korea, with older facilities in Ulsan scoring far higher than the newer plant in Asan. However, the disparity between Korea and the U.S., Czech Republic and China puts the Korean operations at a clear disadvantage in profitably competing through exports in the U.S. and other markets.

Hyundai’s union has not backed off from its original wage demand for an average monthly base-pay increase of roughly 8%, or 160,000 won ($133.60) . The union also wants 30% of Hyundai’s net profit disbursed as bonuses.

The union wants job guarantees for current employees until they reach retirement age, and for members of its temporary workers union. Hyundai wishes to raise the retirement age for all workers to 60 from the current 58, but the union wants to extend it to 65.

The union also has asked Hyundai to seek its permission before building any new plants overseas and to prioritize production increases in Korea, with a view to serving overseas markets through exports.

Analysts note these all are thorny issues in negotiation sessions that this year were supposed to focus only on wages and working conditions.

Hyundai’s global sales for the first seven months of 2015 were down 2.8% with 2,143,384 vehicles sold, according to WardsAuto statistics, with exports off 3.1% at 2,696,250.

For the second quarter of 2015 Hyundai reported net income of 1.7 trillion won, a drop of 24% from prior-year. Hyundai cites a steep sales decline in China and the strong Korean won as major factors in the sharp April-June earnings drop.