Precarious venture
Compromise needed for win-win job project
Gwangju metropolitan government’s joint project with Hyundai Motor to build a plant in the southwestern city is on the verge of collapse due to fierce opposition from unions just before a signing ceremony initially scheduled for Thursday.
The venture is aimed at creating more than 10,000 jobs by building a plant capable of producing 100,000 compact SUVs starting in 2021. The project would allow the nation’s biggest carmaker to produce compact SUVs at a lower cost as the employees would be hired at less than half the wages of the carmaker’s workers.
The tentative agreement reportedly includes a 44-hour workweek and an annual salary of 35 million won ($31,236), less than half the average 92 million won Hyundai workers take. That is higher than salaries at plants run by the carmaker’s competitors in Japan and Germany. To make up for the low wages, the city government will provide subsidies for housing, healthcare and other necessities.
The negotiations came to a halt after the workers took issue with a clause in the tentative agreement banning collective labor negotiations before it reaches a production capacity of 350,000. The workers claim putting a grace period on collective bargaining violates the law. This could lead to a prolonged stalemate in negotiations.
The project has also triggered opposition from Hyundai Motor’s unions, which launched a partial strike Thursday. They are claiming the Gwangju job project is destined to fail as the domestic car market is already saturated. The Korean Confederation of Trade Unions (KCTU), one of the umbrella union groups, called the project a fraud.
Despite the good intentions, the Gwangju job project carries some points of concern, such as sustainability and profitability. But as Gwangju Mayor Lee Yong-sup said, it could bring a breakthrough for the regional economy. The success of the project is crucial for the city as well as the Moon Jae-in administration, which has placed priority on job creation. If the model succeeds, it could also impact other Korean conglomerates which have shunned local investment.
Due to the high costs, there has not been a new car plant in Korea since the establishment of Korea GM’s Gunsan plant in 1997. If the agreement is implemented, it will be the first time for a new car plant built in more than 20 years, providing an impetus to revive the economy of Gwangju, a city that has long suffered lack of jobs and new growth engines.
These are very difficult times for the Korean car industry, which is dogged by heavy competition abroad and sluggish sales at home. The unions and Hyundai should do their utmost to swiftly resume negotiations for a win-win deal that benefits the regional economy and the car industry.