Renault Samsung Union Caves on Wage Demands; Increase, Bonuses Modest

The Korean Metal Workers Union branch representing workers at Renault Samsung Motors veers from national leadership policy to drop demands bonuses be included in ordinary wage calculations, ratifying a new collective bargaining agreement today.

Dropping the bonus-recalculation demand comes as a surprise to many analysts, who believed RSM would be the one to cave after a series of partial strikes that have plagued the automaker since July. Union workers began the walkouts over frustration with the pace of the wage negotiations.

RSM’s hardline stance ran counter to negotiations at GM Korea and Ssangyong, where the bonus recalculation was accepted by management rather quickly. Had RSM gone the same route, it would have put more pressure on Hyundai and Kia to follow suit.

Although this seems to give both Hyundai and Kia, the last two holdouts in the labor negotiations, some breathing room on the wage-recalculation demands, analysts believe the recent action by Hyundai Chairman Chung Mong-koo in bidding an incredible $10.1 billion for property for a new international headquarters in southern Seoul has made it a moot point.

The bold investment move by Hyundai is seen as intensifying union resolve to ensure bonuses are factored in as part of the regular wage calculations. Inclusion of bonuses substantially hikes overtime and holiday payments and the amount of severance employees must be paid when they retire.

Hyundai publicly has maintained it would suffer a substantial profit reduction and have difficulty maintaining normal operations if it were to add bonuses into its wage calculations. Executives say such a move would hurt Hyundai much more than GM Korea and Ssangyong.

However, Chung’s insistence in bidding $10.1 billion in cash for a property that has been assessed at only one-third the value reportedly has infuriated union leaders and many workers, and they vow to go for the jugular in their continuing labor talks.

Various sources in Seoul report the exorbitant bid for the Gangnam property was made only at Chairman Chung’s insistence, and that top executives in the Hyundai-Kia-Hyundai Mobis syndicate that made the bid had urged making an offer of less than half that amount. The only other serious contender for the property, Samsung, reportedly bid little more than 4 trillion won ($3.9 billion).

However, the elaborate international headquarters in the upscale Gangnam District of southern Seoul is seen as a legacy statement by Chung. He has said it will be decisive in setting the image and goals for Hyundai throughout the next 100 years.

The Renault Samsung workers settled on a deal that was not changed much from one they rejected a week ago.

The basic wage increase is quite modest at just 65,000 won ($63) per month, but it is the first hike for workers at the hard-pressed company in the past two years.

They receive a special bonus of 3 million won ($2,900) for ending the partial strikes and wrapping up negotiations. Management says the special bonus also is a gift for successfully launching production of the Nissan Rogue, which RSM is producing on a contract basis for the Renault Nissan Alliance for export to the U.S.

They also will receive a performance bonus equal to 1-1/2 months’ pay, and at the end of the year will receive another half month’s pay if RSM’s production target of 80,000 vehicles is met.

Management also has agreed to provide each worker with 200,000 won ($190) in gifts.

Significantly, RSM agreed to allocate more workers to its production lines to ease the workload, and to invest in new production equipment that would eliminate some hard manual labor.

Management also added an extra holiday for the Lunar New Year and Chuseok harvest season celebrations in any year the holidays fall on a weekend.

Workers appear happy enough to get immediate wage and bonus gains while accepting management’s position not to include bonuses in the basic wage calculation. Management had asked, and the union agreed, to await the outcome of lawsuits filed by workers demanding the wage recalculation and retroactive payment for the shortfalls.

That is a considerable victory for management, analysts believe, as the court cases likely will not be decided for several more years.

RSM says it now can resume in earnest production of the Rogue and the newly launched RSM7 Nova version of the RSM7. The RSM7 Nova already is on sale in South Korea and soon will be exported to many other markets.