Hyundai, Kia Unions Threaten Strike Over Wage Demands

The heat is on at Hyundai and Kia, as worker unions at 14 major companies within the Hyundai Motor Group collectively are threatening to strike when labor negotiations resume after the annual holiday shutdown period that runs through the week of Aug. 4.

The three largest automotive companies within the Group, Hyundai, Kia and parts and systems producer Hyundai Mobis, are deadlocked in collective-bargaining negotiations. The crux of the dispute is the demand from unions that basic wages be recalculated to include currently excluded regularly paid bonuses.

Including bonuses in the wage calculation increases the amount the companies must pay workers in overtime, holiday and retirement pay. The amounts are significant and substantially increase an employer’s labor costs. In Korea, salaried workers also are unionized, and whatever the labor unions win in their annual negotiations usually extends to all salaried employees as well.

Worker bonuses, now paid separately from regular monthly wages, are substantial. This is illustrated in the case of GM Korea, whose workers in the last week of July ratified a wage and collective-bargaining agreement contract, which includes the demanded recalculation of the basic wage structure.

The GM Korea deal includes bonuses totaling 10.5 million won ($10,200), and the pay increase raises average wages about 3.3%. Analysts say the bonuses translate into 10%-30% of the worker's annual wage, depending on his job and years of seniority. In Korea, workers receive pay increases based on longevity.

The Korea Metal Workers Union, the umbrella group for the labor unions at all five of Korea’s automakers, has charged the bonus formula is a ploy in which workers receive part of their negotiated wage increase as bonuses so as to exclude it from basic wage calculations.

The unions at all five of the automakers are branches of the KMWU, which has set the basic wage rate recalculation as a primary objective for all.

With Ssangyong the first to accede to the demand, followed a week later by GM Korea, union spirit has galvanized on the matter, and workers undoubtedly will strike if Hyundai Group companies do not give in to the demand, analysts say.

At a news conference in Ulsan, home to most of Hyundai’s Korean manufacturing plants, which account for a third of its total global volume, union President Lee Kyung-hoon makes it clear workers are willing to see the company pushed to the brink unless they get their demands.

Lee says the union is aware of Hyundai’s declining profit situation, brought on mostly by unfavorable foreign exchange rates, but says if the companies and unions don’t resolve the wage-recalculation matter “all perish together.”

The unions are well aware a strike in Korea would cripple both domestic and overseas supplies and choke off sales and profits.

The situation at Kia might be even more devastating, analysts note, as its Korean plants provide the pipeline for more than half the automaker’s global sales.

Neither Hyundai nor Kia will comment on the negotiations.

However, analysts say both automakers are determined not to give in on the matter. Employee lawsuits have been filed against both seeking back wages because bonuses were not included in overtime and holiday pay in previous years.