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Hyundai Braces for Second Straight Year of Labor Strikes

Hyundai Motor Braces for Second Straight Year of Labor Strikes
A pair of gloves lay on the halted assembly line at the Hyundai Motor Co. plant during a strike by the company's labor union in Ulsan, South Korea on July 13, 2012. Stalled wage talks at Hyundai last year led to the costliest strike in its history, causing a production shortfall of 82,088 vehicles and an estimated 1.7 trillion won in lost sales. Photographer: SeongJoon Cho/Bloomberg

Aug. 14 (Bloomberg) -- Hyundai Motor Co. and Kia Motors Corp. workers agreed to go on strike for a second straight year to demand higher wages.

More than 70 percent of Hyundai’s 45,000 guild members voted in favor of authorizing union leader Moon Yong Moon to call for a walkout at the company, Kim Gi Hyuk, a union spokesman, said in a text message today. Workers at Hyundai’s affiliate Kia also voted in favor of a strike plan yesterday. The strike may begin as soon as Aug. 20, Kim said earlier.

While Hyundai is used to stoppages -- workers have gone on strike in 22 of the past 26 years -- the walkouts loom as the weaker yen gives Japanese automakers an edge to cut prices or offer incentives on their cars. Seoul-based Hyundai’s net income has fallen for three straight quarters, while analysts estimate Toyota Motor Corp. is headed for a record annual profit.

“If the union does walk out as planned, it will lead to a worse-than-expected third-quarter profit,” Lee Sang Hyun, an analyst at NH Investment & Securities Co., said by phone before the voting results were announced. Still, “it’s unlikely the strikes would go on for long as the union won’t risk giving up their bonuses, which are given only when workers meet production targets.”

Hyundai and Kia’s labor unions have said they’re demanding a pay increase of 130,498 won ($117) a month and for 30 percent of net income to be distributed to workers. The talks started May 28 for Hyundai and July 2 for Kia.

Costly Strikes

Hyundai’s union will hold a meeting on Aug. 19 to set out the specific strike schedule, spokesman Kim said by phone yesterday. This year’s strikes, which may begin as early as Aug. 20, are unlikely to lead to full stoppages of all plants in the country like last year, as the union is considering having a rotating schedule among each of the plants, Kim said.

Stalled wage talks at Hyundai last year led to the costliest strike in its history, causing a production shortfall of 82,088 vehicles and an estimated 1.7 trillion won in lost sales.

Hyundai climbed 2.6 percent to 233,000 won at the close in Seoul trading today. Kia rose 1.3 percent. The benchmark Kospi index advanced 0.6 percent.

Hyundai sent a letter to the union yesterday requesting that the talks resume, according to an e-mailed statement.

Militant Unions

The vote at Hyundai, which has the nation’s biggest workers’ guild, signals the resurgent militancy of South Korean labor unions as unemployment rises and employers shift production overseas. Past Hyundai union protests have led to clashes between police and militant unionists armed with steel pipes and Molotov cocktails.

The number of South Korean work days lost on labor disputes more than doubled to 933 days last year from 429 in 2011, according to data compiled by the nation’s Ministry of Employment and Labor. In 1993, the Bank of Korea cited protracted labor strife at Hyundai as a key reason for its decision to lower its gross national product estimate.

Prior to 2008, the union went on strike every year except one, costing what Hyundai estimates to be more than 1 million vehicles valued at 11.6 trillion won in lost sales.

U.S. Incentives

Moon Yong Moon was elected as Hyundai’s union leader in 2011 after pledging to be a tougher negotiator than his predecessor, Lee Kyung Hoon, who was elected to a two-year term in 2009 after pledging to curb unnecessary strikes.

Moon’s activism in past protests led him to be arrested four times and laid off by the company three times since he joined Hyundai’s union in 1988.

The won has gained 26 percent against the yen in the past year, curbing Kia and Hyundai’s competitiveness against Japanese automakers, which are also big exporters to the U.S.

Hyundai’s incentives in the U.S. surged 47 percent through July from a year earlier. That compares with a 1.7 percent decline in Toyota’s incentives and the market average of a 2.4 percent increase, according to Autodata Corp.

Hyundai’s sales rose 2 percent in the U.S. market through July, trailing the industry’s 8.5 percent growth. Its deliveries slumped 7.2 percent in Europe in the April to June quarter.

Kia spent 7.6 percent more per vehicle on incentives in the U.S. this year, while sales fell 3.1 percent, according to Autodata.

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

To contact the editors responsible for this story: Frank Longid at flongid@bloomberg.net; Young-Sam Cho at ycho2@bloomberg.net

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