As Hyundai struggles, its labour union shows signs of softening

SEOUL: When workers at South Korea’s Hyundai Motor went on strike last year, the stoppage lasted 24 days, triggered months of negotiations and netted them their smallest raise in nearly a decade.

This week, after just two days on strike, their powerful union agreed to a deal before the summer holidays, the first time in eight years that has happened.

The agreement gives workers a smaller raise than last year’s US$14,000 in bonuses and wage increases, union officials said, declining to provide details. It had sought a 5.3 per cent increase in wages, a request it reduced to 2.1 per cent; inflation in South Korea is about 1.9 per cent.

Those relatively small gains, and the speed to which they were agreed, are signs that the union may be softening its stance amid growing criticism, falling profits, the near bankruptcy of GM Korea and potential US tariffs.

Union members endorsed the deal late Thursday, just before the automaker reported its second-worst quarterly net profit since 2012.

“We’re fed up with strikes and feeling a crisis too,” a Hyundai worker in its sprawling Ulsan factory complex, the world’s biggest automaking facility, told Reuters, citing GM Korea’s recent wage deal and trade disputes with Washington.

This year, General Motors’ South Korean unit shut down one of its four plants, cut jobs and agreed with its union to freeze wages, skip bonuses and trim benefits to stem mounting losses.

Hyundai chief executive Ha Eon-tae said during negotiations that a 25 per cent tariff – a possibility as the US escalates trade pressures globally – would be a ‘nuclear bomb’.

He said it would lead vehicle prices to increase as much as US$5,500 each and wipe out 70 per cent of the company’s revenue, according to union notes seen by Reuters.

More than 70 per cent of Hyundai’s workers are unionised. By contrast, the union participation rate in South Korea is only about 10 per cent, the second-lowest after Turkey among member countries of the Organisation for Economic Cooperation and Development.

The union’s 50,000 members helped drive Hyundai’s rapid growth in the 2000s, when the company earned record profits and had an operating margin above 10 per cent – the industry’s highest.

The union, which has staged strikes in all but four of the 30 years since it was created, points to that performance in negotiating for generous wages and benefits.

But the inflation- beating wage increases over the years have widened the pay gap with non- unionised workers and subcontractors. Union members’ annual average wage was 92 million won (US$82,000) in 2017, among the highest in the global auto industry.

When they launch strikes, the union’s office is bombarded with calls from businesses, conservative groups and others criticising them for taking for granted their high wages, benefits and job security, some union members say. — Reuters