Olive Branch Extended, Labor Talks Stay on Cool Side in Korea

Something highly unusual is happening in the Korean automotive industry.

All five automakers are on the verge of shutting down for annual 1-week summer vacations and for the first time there are no strike actions or expressions of union rancor emerging from early wage negotiations.

Two of the companies, Renault Samsung Motors and GM Korea, already have reached new labor deals. Insiders say industry leader Hyundai is in a state of bliss as talks move along smoothly and there is no sign of union displeasure during discussions of any of the wage and working-condition demands.

A Hyundai spokesman tells WardsAuto all plants will shut down for the summer vacation Aug. 3-7, and both sides are talking about a win-win situation, even though 15 negotiating sessions have been held without an agreement.

Analysts say both sides are keeping discussions to a near-hypothetical basis, rather than wrangling, with the union asking probing questions and Hyundai management doing all it can to provide sound and objective answers.

The Hyundai spokesman notes the next bargaining session is not scheduled until Aug. 11, giving both sides a few days to make adjustments after the summer shutdown.

He says the talks this year focus solely on wages and avoid discussion of the government-advocated merit-wage system that would replace the current seniority system in which workers receive progressively higher pay levels the longer they remain with a company. Hyundai will “stay within the current system,” he says.

The two sides also will not focus on the peak wage system being advocated by the federal government. That would see worker wages begin to fall at around age 55 and decrease each year until the worker retires. It will be implemented at more than 500 government-owned businesses in 2016, and the government wants it adopted by automakers and other major employers.

Government advocates calculate that at Hyundai, the tier of workers with the highest seniority is paid more than three times as much as those with the lowest, even though older workers are less productive.

Hyundai’s stablemate, Kia, is having such good relations with its union that formal wage talks haven’t even begun yet – a delay that’s highly irregular.

Usually by this time of year both sides at most of the automakers have been fighting hard, with unions often threatening strike actions or resorting to partial strikes to prod management in their favor.

A Kia spokesman notes this year management and the union have agreed on a news blackout for the negotiations. The blackout is so pervasive the spokesman won’t even reveal the numbers of blue- and white-collar workers employed or the date set for the first negotiating session – if there is one at this point.

The Hyundai spokesman says the present social atmosphere in Korea is one of collective sorrow and “national remorse” brought about by the April 2014 loss of 304 citizens aboard the cruise ship, the Cheonan, which sank on a routine pleasure run to semi-tropical Jeju Island. Most of those lost were high-school students on their spring break. The nation was shocked into a somber state, reining in its energetic charge to grow and succeed economically at all costs.

Compounding the mood are increasing recessionary pressures impacting the automotive industry and manufacturing in general and the recent MERS epidemic. The national unions have been reticent to disturb the remorseful tranquility with acrimonious bold demands for high wages and bonuses.

Whatever the reason, it is remarkable the automotive wage talks have progressed in four out of five cases, apparently very smoothly and without rancor, and that they already have been settled amicably in two of those cases.

GM Korea Ratifies Pact

The union's acceptance of much less than it bargained for at GM Korea illustrates the seeming new era of peaceable labor negotiations.

This week, 55% of GM Korea’s unionized workers ratified an agreement reached on July 22, with the union accepting far less in pay and bonuses than it had been demanding.

GM Korea’s union had authorized partial strikes and one was set for July 30, but management and the union negotiators were able to agree on a tentative deal one day earlier and not a single hour of production was lost.

The union had demanded a monthly wage increase of 160,000 won ($138) and bonuses equal to five months’ pay.

It settled for a monthly increase of 83,000 won ($72), a little more than half of the amount demanded, with signing and performance bonuses totaling 10.5 million won ($9,000).

While the bonuses may seem high, they equal less than one third of the 5-month bonus demanded. The average annual pay for regular employees is around 90 million won ($77,000).

Management has claimed GM Korea and its union discussed only wages throughout the bargaining sessions, but that is not entirely accurate.

Early on in the meetings the union demanded to know future production plans for GM Korea’s two plants in Bupyeong and its assembly plants in Gunsan and Changwon. The union feared GM Korea was combining operations of its two Bupyeong assembly plants into one, which would significantly reduce headcounts.

Management presented a production plan showing it would launch output of the Chevrolet Malibu in second-half 2016, which means there will be no consolidation of Bupyeong operations.

Renault Samsung Adopts Peak Wage System

Renault Samsung was the first of the five automakers to sign a new wage agreement, ratified July 27.

The union and management teams not only settled on wages and bonuses, but even came to terms on adopting the peak wage system advocated by the government.

RSM’s workers are well aware of the company’s sorry financial straits and have a history of cooperating. They even worked for two years in succession without receiving any wage increase.

This year they settled for a 2.3% average pay hike of about 42,000 won ($36) and a 7 million won ($6,000) incentive bonus for accepting a lower wage increase than was targeted and agreeing to adopt the peak wage system.

Government and industry advocates say the peak wage system will enable more workers to stay on the job until age 60, and by lowering the payout for upper seniority workers it will make funds available to hire more workers.

This could alleviate a presently contentious situation that sees automakers hiring large numbers of temporary workers at around half the pay of regular employees and without fringe benefits. They also bring suppliers into the plants where they handle subassembly work at lower wage rates.

Adoption of the peak wage system by Korea’s key manufacturers could create job opportunities for more than 100,000 younger workers each year, government advocates say. At present more than 10% of Korea’s young people in their late teens and early 20s are jobless.

A parallel labor reform being pushed by the federal government seeks a performance-based pay system that would rein in costs and yield higher productivity, advocates say.

The federal government will provide arbitrators and counselors to implement such systems. They are already on the scene at the RSM plant in Bupyeong, meeting with rank-and-file workers and studying the plant and workplace job demands.

Peak Wage System Contentious

That RSM was able to get the peak wage system into the contract is perhaps remarkable. Korea’s overarching union umbrella organizations, the Federation of Korea Trade Unions and the Korean Confederation of Trade Unions, are firmly opposed to implementing either new pay system.

The KTCU called for a 1-day general strike in July to protest the government-backed proposals. Remarkably, the Hyundai Branch of the Korea Metal Workers Union, which comes under the KTCU, refused to participate in the 1-day strike on the grounds it had nothing to do with wage or working conditions, which are the only legal bases for strike action under Korean labor law.

While it stretches the imagination, it may be possible this year for Hyundai and Kia to agree to new wage packages without any strike action or public rancor. Both labor and management know the companies are hurting and crippling them even more with strikes would be counterproductive.

At low-volume Ssangyong Motors, being kept on life support for the moment by booming sales of its newly launched Tivoli compact SUV, union representatives also are being conciliatory and cooperative in talks that began June 9.

Ssangyong workers head for vacation Aug. 1 with confidence a deal will be signed sometime prior to termination of the present contract that runs through September. The two sides are discussing only wages and steering clear of the peak wage system conundrum, a spokesman says.

Industry naysayers claim that for Hyundai, Kia and Ssangyong, where there still are three more months to go before present contracts expire, the acrimonious and strike-filled history of the autoworkers may repeat itself once again.

Optimists believe 2015 may be the first year of peace the Korean automotive industry ever has experienced.