Unrest as Usual in Korean Automaker, Union Talks

July has been a fractious month for the Korean auto industry, with the union branches of the Korea Metal Workers Union showing their displeasure, and their teeth, over dragged-out, going-nowhere negotiations with the country’s five automakers.

Wages and wage structure are the predominant issues in what has become a near-annual ritual of strikes and strike threats.

GM Korea’s 14,000 workers voted Wednesday by a 69% margin to strike, although the union did not set a target date for walking out, Reuters reports. Renault Samsung workers voted last weekend to strike if negotiations showed no progress.

Employees at Hyundai, the country’s No.1 automaker, are threatening to put down their tools in an action that likely would extend to sister company Kia. Ssangyong and union bargainers have made little headway.

The Hyundai workers’ union gave everyone chills by walking out of two bargaining sessions prior to last weekend, protesting lack of progress, and threatening strike action unless tangible results are shown.

Talks began June 3 and negotiators held eight meetings, the last two of which went sour and prompted the union to announce it is ready to go on strike if management does not show signs of meeting workers’ demands.

This week they are meeting again with management on an urgent, intensified basis, pressing their demand not only for the customary boost in wages and liberal bonus payments, but also for recalculation of the basic wage rate that determines their total compensation.

The demand for a 160,000-won ($158) wage hike, 30% of Hyundai’s net income to be paid on a proration basis as bonuses, and reduction of working hours to a maximum 52 hours per week, all are routine matters that might be resolved easily.

However, the furor is over a demand for recalculation of basic wages to include previous stand-alone bonuses that were paid in increments over several months. It is a demand being made not just of Hyundai, but of all of the automakers, under direction of the KMWU central office.

Many analysts believe including bonuses, holiday payments and some fringe benefits as part of the ordinary wage calculation could raise Hyundai’s annual labor costs by some 5 trillion won ($4.9 billion), so it is a crucial issue.

According to union sources, Hyundai management has said it will not recalculate wages in line with their demands under any circumstances, including a strike by the workers.

The union announced July 8 it will file for mediation with the National Labor Relations Commission, seeking to end the impasse through government action, while still threatening to strike.

Market Share at Risk If Output Crimped

Some analysts believe it would be less expensive for Hyundai to endure strike action than to yield to the union demands, so long as recalculation of wages is avoided. In 2013, for instance, the company lost 1.5 trillion won ($1.48 billion) in production because of partial strikes that were held throughout the negotiations.

However, either partial strikes or a general strike could cause Hyundai to lose hard-fought domestic market share to competitors, including the importers whose sales jumped 26.5% in the first half of 2014, compared to little more than 2% for Hyundai.

Interrupted production would have the same adverse effect on overseas markets that are supplied out of Korea, including the U.S. where Hyundai is suffering from lack of inventory, as well as in some markets in Europe.

Kia also launched negotiations with its union on June 3 in lockstep with sister company Hyundai and so far has also completed eight meetings, with two sessions scheduled this week.

Kia did not respond to WardsAuto’s request for the union’s wage and working-conditions demands, but it is in line with those of the union’s Hyundai Branch. All five automakers are facing virtually the same agenda by the KMWU central authority.

Analysts believe that whatever may befall Hyundai in this year’s talks will wind up on Kia’s plate as well.

Strike Believed Serious Threat to GM Korea

Like its counterparts at Hyundai and Kia, the GM Korea union is adamant in demanding recalculation of basic wages to include certain previously excluded, regularly paid bonuses.

The union also is demanding the country’s third-largest automaker increase production after parent General Motors stops selling Chevrolet-branded cars in Europe after 2015.

The automaker maintains almost a 10% share of the home market, although its loss of overseas sales of completely built-up units has been devastating and led to a drastic downsizing.

The strike threat is so serious that GM Korea President and CEO Sergio Rocha sent a personal e-mail appeal to workers July 8 advising a walkout could critically injure the company to a far worse degree than any of them imagine.

GM Korea has been deep in negotiations with its union since April 23 and has completed 13 rounds of talks to date. The union is asking for a monthly pay increase of 160,000 won, five months’ pay as a performance bonus and changes in the current working-hours arrangement.

Rocha has said getting through the negotiations with no lost production is critical, and the huge new financial burden that could result from recalculating wages will be a hardship not only for the company, but also for the entire industry.

But both GM Korea and its parent General Motors are confident that if GM Korea must give in to the union and recalculate basic wages to include some bonus payments, then the company would be excused from any retroactive liability for underpayments in past years.

Strike Cost RSM 400 Units

At Renault Samsung, 90.7% of the workers who voted over the weekend approved strike action. News reports say workers put down their tools for two to four hours Monday at the Busan plant, although the automaker’s chief spokesman insists there was no strike and acknowledges only protest action has taken place.

However, insiders say the protests cost the automaker about 400 units of lost production.

The spokesman says negotiations resumed Tuesday and bargainers plan to meet every day throughout the week. But analysts note talks have dragged on fruitlessly since April 21.

The automaker’s spokesman says the union is asking for a high increase in wages, but adds, “the company, even though we had some profit last year, has to improve its situation and we are proposing step-by-step increases.”

Korean news media quote an unnamed RSM official as saying that if a strike stopped the automaker from delivering the Nissan Rogue to the U.S. under a contract with the Renault Nissan Alliance or if it could not produce enough of the newly launched SM5 midsize diesel sedans to keep up with projected sales of 1,000 units monthly, “the future of the company is doubtful.”

The RSM union filed for mediation with the National Labor Relations Commission on June 25, seeking government assistance to break the deadlock with management and force some progress.

The company official says the union is asking for a double-digit pay increase to make up for two years of frozen wages. The RSM spokesman, however, will not disclose the wage-increase figure sought by the union.

Despite the union’s overwhelming vote to strike, the spokesman tells WardsAuto without elaborating that RSM does not face the same problems as the other automakers, and management plans to wrap up negotiations within the week, “much earlier than Hyundai or GM Korea.”

At Ssangyong, Indian automaker Mahindra & Mahindra’s Korean subsidiary, there has been no progress.

The frustrated union has put its president up as a candidate in the upcoming National Assembly by-elections, hopeful he will win a seat and a chance to voice his union’s demands in a national forum.

There is great unhappiness among workers as several have been ordered by a local court to pay millions of dollars in damages sustained by the company during a prolonged, fiery union occupation of the Pyongtaek plant in 2009.

On the unionists’ side, an appeals court held Ssangyong cooked its books that year to make itself appear to be in worse straits than it was so it could lay off 2,600 workers. The court ordered the reinstatement of 153 of the surviving workers and to pay 151 of them 1 million won (roughly $1,000) each in special compensation. The company is fighting the ruling in a higher court.

What happens in negotiations with Korea’s automakers this week is critical. Right now it looks like the Wild West, with a possible shootout imminent, though management at all five companies decidedly hopes not.

Analysts say that to avoid the fireworks, management at all of the companies must be conciliatory, because, as unionists at Hyundai, RSM and GM Korea have demonstrated, they have had enough rhetoric and now are playing for keeps.