Hyundai, Kia Workers Authorize Strikes as Talks Stall

Hyundai and Kia workers vote to authorize a strike against their companies, although their respective unions will meet with National Labor Relations Commission representatives to try and restart failed collective-bargaining talks.

Sources on the union side at both companies say voting on Tuesday to authorize a strike at both auto makers companies was assured. Neither union has ever voted not to strike, a union source tells WardsAuto.

Both the Hyundai and Kia branches of the Korea Metal Workers Union broke off negotiations for new collective-bargaining agreements last week, saying no progress had been made despite more than two months of meetings.

Further, a management document outlining a scheme for “demolition” of the Hyundai union has surfaced, infuriating union members who plan a major demonstration later this week at the auto maker’s headquarters.

“The 45,000 members of the KMWU Hyundai Motor Branch who remember the arduous struggle to create a democratic union cannot help but be outraged at this document, a blueprint for management’s organized attempt to annihilate the democratic union,” a source within the Hyundai workers’ union tells WardsAuto.

The Hyundai Branch of the Korean Metal Workers Union (KMWU) finalized its bargaining agenda in May at its annual meeting. It called for a wage increase of 130,498 won ($117) per month, profit sharing of 30% of Hyundai’s 2012 net profits and renewal of the existing collective-bargaining agreement, with 43 revisions.

The current average monthly wage is 1.89 million won ($1,688).

The demands were sent to Hyundai management May 10 and negotiations began May 28, after the company had studied the agenda and made its response.

Eighteen rounds of main negotiations and five rounds of working-level talks were held before the union broke off negotiations Aug. 6, as management had presented its own proposals.

“Instead the company denied even the existing CBA (collective bargaining agreement) provisions and maintained a stance that the trade-union proposals are excessive, that they are heavy (and) that they are difficult,” the union official says.

“In reality, then, the company rejected our demands.”

Hyundai publicly expresses “regret” the union broke off talks and management hoped negotiations could resume without strike action.

A source says the auto maker has offered to resume negotiations Friday, but the union will not respond to that offer until Wednesday, after it has reviewed the final results of the strike vote.

Regardless of its decision Wednesday, a strike cannot be called until Aug. 19 because both sides are meeting independently with mediation teams from the NLRC. Workers cannot strike during the mandatory 10-day mediation period.

The unions called in the NLRC, in accord with Korean labor law, when the negotiations broke down.

Complicating the situation is a confidential Hyundai document the union says it discovered Aug. 7 and which has union officials and their membership outraged.

The union official tells WardsAuto the document, which it says is entitled “Paralyzing the 2013 Wage and Collective Bargaining Struggle and Demolition of the Democratic Union,” details “management’s scheme to impair trade-union autonomy.”

For all the furor surrounding the document, the official says the union stands ready to accept a formal response by Hyundai, should one be submitted.

“The goal of what we are doing here is not to strike,” the official says. “We are trying, through collective bargaining, to distribute the fruits of the past year and trying, through collective bargaining, to get the global Hyundai Motor Corporation to fully honor its social responsibility.

“If it does this, the corporate image and brand value are elevated…But if this humble request is rejected by the company, we do not have many choices before us.”

A Kia source says the Hyundai union’s demands and actions are “mirrored closely” by those of the Kia union, although the auto maker does not officially comment on the negotiations.

The list of demands being made by the KMWU’s Hyundai branch is long and would be costly for the auto maker, analysts say.

In addition to the 6.9% basic wage increase and profit-sharing payments to both regular and contract Hyundai workers, who belong to a KMWU-affiliated union, the KMWU’s Hyundai branch seeks an increase in the complex bonus system that it considers to be a normal part of worker’s wages.

Regarding profit-sharing, the union source tells WardsAuto:“The management’s response from the beginning to the workers’ demands was that they were excessive, they were heavy and they were difficult. The net profit in 2012 is 9.56 trillion won ($8.55 billion).”

The union also makes several demands for improved employee health and welfare benefits.

It wants Hyundai to analyze all its plants for the presence of carcinogens and eliminate carcinogenic agents or else install protective measures. Further, it wants the auto maker to provide compensation and support for workers who develop cancer.

It wants the retirement age for its workers extended from 59 to age 61, to match the age at which employees can start receiving compensation under Korea’s national pension system. Hyundai and Kia workers do not receive company-paid pensions, but the auto makers issue lump-sum severance payments equal to one month’s pay for every year of employment.

Currently, workers who retire at age 59 must sign on again as temporary contract employees and work for an additional year before they qualify for the government pension.

The Hyundai union official points out the average age of its members is 44.4 years and average seniority is 19.3 years.

The union also seeks formation of a joint labor-management committee that will decide on building or expanding Hyundai plants overseas and participate in the timing of new-vehicle introductions.

Strikes against Hyundai and Kia would devastate the Korean auto industry, analysts say. Each day of a walkout would cost up to 6,000 units of production at Hyundai and 3,900 at Kia.

Some analysts believe the unions are whipsawing both auto makers by using their own strategies against them.

Chung Mong Koo, chairman of both Hyundai and Kia, said early this year that despite tight inventories, there will be no brick-and-mortar capacity expansions during the next two years and both auto makers must make do with their current plants.

A strike while sales of some models are being curtailed by supply constraints in the U.S., Korea and some other markets would affect the bottom line quickly, the analysts note.

Strike action at Hyundai would be a colossal blow to the national economy as the auto maker employs 45,000 workers and operates five vehicle-assembly plants in Ulsan, one in Asan and a commercial-vehicle factory in Jeonju.

Kia has 33,000 workers in Korea and operates three major vehicle-assembly complexes in Hwaseong, Sohari and Gwangju.

The nature of the close-knit, interactive Hyundai Group also would be affected by strike actions at either auto maker, analysts note.

Because the member companies have many common shareholders, including Chung and his family members, the financial impact of a strike would register on all of its “in-group” suppliers.

These include major players Hyundai Mobis, Hyundai Powertech, Hyundai MSeat, Hyundai Wia, Wia Magnum Powertrain, Hyundai Steel and  Hyundai Hysco.

Thus the strength of the carefully assembled Hyundai Motor Group, with its interconnected managements, works against it in this situation, as many of its companies would face collateral production cuts or interruptions in the event of strikes against either of the two auto makers.