Hyundai Motor Co., South Korea’s largest carmaker, reached an agreement with its union workers to end the costliest strike in the company’s history.
An Aug. 30 accord between labor representatives and Hyundai was backed by 53 percent of the company’s 45,000 guild members, according to a statement on the union’s website today.
The agreement, which will raise the average compensation by 27.3 million won ($24,000) and discontinue overnight shifts, ends the first legally sanctioned walkouts at the carmaker since 2008. Seoul-based Hyundai Motor estimates the dispute cost the company a record 1.7 trillion won in lost production.
“It’s definitely good news but the production loss was worse than expected and will most likely have a negative impact on the company’s third-quarter earnings,” said Lee Sang Hyun, an analyst at NH Investment & Securities Co. “However, Hyundai will be able to make up for the losses in the fourth quarter and meet their yearly sales target by end of the year.”
Hyundai shares fell 1.9 percent to 237,000 won as of 11:30 a.m. in Seoul trading as the strike led the company’s monthly sales, reported yesterday, to fall for the first time since May 2009. The benchmark Kospi index was little changed.
The wage agreement includes a 98,000 won increase in monthly base salary, a one-time payout of 9.5 million won and bonuses worth 500 percent of a worker’s monthly salary, according to a separate statement on the union’s website. This is equivalent to an average of 27.3 million won extra per person, according to the statement.
The pact will also end overnight shifts from March next year. Employees will now work from 6:40 a.m. to 3:20 p.m. or 3:20 p.m. to 1:10 a.m. as Hyundai ends 24-hour staffing of assembly lines.
The company will invest about 300 billion won in equipment and facilities to maintain output after working hours are reduced, according to an e-mailed statement on Aug. 30.
While Hyundai Motor has periodically faced partial stoppages in the past four years because of labor disputes, none were legally sanctioned and they rarely lasted beyond several hours. The last formal strike occurred in 2008, when a 12-day walkout cost the company an estimated 44,645 vehicles, or 691 billion won, according to Hyundai.
Hyundai estimates labor disputes had caused missed production of more than 1 million vehicles and lost sales worth 11.6 trillion won before this year. Workers went on strike in 21 of the first 22 years since the union’s 1987 formation.
Hyundai has reduced the impact of strikes in South Korea by expanding production in the U.S., China, India and Turkey during the last decade.
A new plant in China started production earlier this year and another plant is scheduled to open in Brazil at the end of this year, according the company.
South Korean plants accounted for 46 percent of Hyundai Motor’s production capacity in 2011, down from 60 percent in 2008, when the last strikes took place, and 93 percent in 2000.
Worldwide, Hyundai sold 2.8 million vehicles for the first eight months of this year, up 8.6 percent from a year earlier, according to an e-mailed statement. Hyundai, together with affiliate Kia, is also bucking the slump in Europe by increasing sales in the shrinking market.
Kia Motors Corp., an affiliate of Hyundai, is still negotiating this year’s wage pact with its union.
The nation’s second-largest automaker has lost 757.7 billion won or 45,995 units in production from strikes that began in July 13, Kia said in an e-mailed statement. Workers will go on another partial strike tomorrow, according to a statement on the union’s website.
The automaker will probably report a third-quarter profit of 2.2 trillion won, according to the average of 22 analyst estimates compiled by Bloomberg.