Hyundai Motor Union Warns of Strike After Talks Stalemate

Hyundai Motor Co. (005380)’s unionized workers in South Korea said they may walk off jobs after making “no progress” in wage talks with the nation’s largest automaker.

“The company’s attitude is testing our rationality,” Hwang Ki Tae, spokesman for the Hyundai Motor workers’ union said in an interview in Ulsan, South Korea, yesterday. “In this situation, our stance is that we may have no choice but to go on strike.”

A workers’ strike in its home market, where Hyundai produces more than a third of its vehicles, would heap further pressure on an automaker already struggling with the effects of a strong won that’s eroding profit from exports. It would also represent a changed tactic from union boss Lee Kyung Hoon, whose previous term from 2009 to 2011 was also the company’s longest stretch of uninterrupted production.

The union’s representatives walked out of the last two rounds of wage negotiations after Hyundai officials tried to talk about the carmaker’s demands before negotiating the union’s terms, Hwang said. The next round of talks scheduled for July 1 will be crucial in determining the union’s decision on whether to strike, he said.

Hyundai declined to comment on the likelihood of a strike, in an e-mailed response to a Bloomberg News query.

The union’s demands this year include a 7 percent or 159,614 won ($157) increase in the average monthly wage, a distribution of 30 percent of the company’s net income in bonuses, a limit on working hours to a 52-hour week and for some existing bonuses to be included as regular wages, according to Hwang and the union’s website.

Hyundai’s employees have struck work in all but four years since the union’s formation in 1987, causing estimated lost output exceeding 16 trillion won, according to the company.

Lost Production

Last year, a three-week partial strike over wage terms resulted in an estimated 50,191 vehicles in lost output, equivalent to more than 1 trillion won, the company said. Together with the union’s boycott of extra weekend shifts, the cost to the company from labor strife in 2013 exceeded 2.7 trillion won.

The union, then led by Moon Yong Moon, refused extra work for 13 weekends demanding higher compensation on those shifts. The stoppage, although not a legally sanctioned strike, cost Hyundai 1.7 trillion won in lost production, according to the company’s estimates.

‘Pragmatist’

It’s unlikely that the union’s strikes this year will be as severe as in 2013, according to Lee Sang Hyun, an analyst at NH Investment & Securities Co. in Seoul.

“The current union leader is known to be a pragmatist,” Lee said. “I doubt that Lee Kyung Hoon will make drastic decisions that may hurt the company extensively.”

Hyundai’s net income this quarter is projected to fall to 2.39 trillion won from 2.4 trillion won a year earlier, according to the average of 21 analysts’ estimates compiled by Bloomberg. The company is facing a negative impact from a strengthening won, which has appreciated 13 percent against the dollar in the last 12 months, the biggest gain among major Asian currencies.

The carmaker will announce second-quarter results next month.

To contact the reporter on this story: Rose Kim in Seoul at rkim76@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Stuart Biggs, Suresh Seshadri

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