Latest Hyundai Labor Talks Stall; Partial Strikes to Resume in Korea

Hyundai management and the Hyundai chapter of the Korea Metal Workers Union fail to reach an accord in resumed labor negotiations Tuesday in Korea, and the union says it will lay down tools again for eight hours daily on Aug. 28 and 30.

Analysts anticipate the auto maker will lose more than 7,000 additional units of production as a result, bringing total losses caused by two weeks of partial strikes to roughly 27,000 vehicles valued at an estimated 448 billion won ($400 million).

No details of management’s offer were available. The union’s dispute committee agreed on the strike action as soon as the talks failed, a source tells WardsAuto.

Hyundai is not commenting on the ongoing work stoppages.

Despite the high production losses incurred by Hyundai this year and the union’s hardline stance, at least one prominent Korean security analyst who follows Hyundai still expects negotiations to be settled in September.

Pil-joong Yoon, senior analyst at Samsung Securities, is confident a new collective bargaining agreement will be signed in September, just ahead of the 5-day Chuseok thanksgiving holiday, which begins Sept. 17.

“The strike always happens in the third quarter and settlement takes place prior to the big holiday,” Yoon tells WardsAuto. “There is nothing unusual in this. If not, there might be a chance of a prolonged strike,” although he does not expect that to happen.

Despite Korean media speculation that Hyundai is reacting to the strike action by planning plans to increase overseas production, Yoon says that is not the case.

Possible overseas expansions that have been discussed internally by the Hyundai Motor group, which includes Kia, are not connected to the current labor situation in Korea, or to the resulting production shortfalls, he says.

“There has been discussion of a fourth plant in China and maybe one more in the United States. This has been up in the air for a long time.”

Decisions on the new manufacturing operations won’t be announced until second-half 2014 and a capacity expansion typically takes 18 months, Yoon says. “Increased capacity would not happen until the 2015-2016 timeframe.”

This would be in line with an edict announced by Hyundai-Kia Chairman Chung Mong-koo in January, who said there would be no new plants constructed during the next two years while the auto makers focus on increasing brand value and quality.