Hyundai, South Korea talks on low-cost car-mak­ing JV hit snag

Business World - - World Business -

SEOUL — Hyundai Mo­tor’s talks to build a low-cost car-mak­ing fac­tory with a lo­cal gov­ern­ment suf­fered a set­back on Wed­nes­day as the South Korean au­tomaker re­jected pro­posed re­vi­sions to cer­tain terms re­lated to wage ne­go­ti­a­tions.

Hyundai and the south­west­ern city of Gwangju had reached a pre­lim­i­nary deal on Tues­day for the fac­tory that in­cluded an an­nual wage of 35 mil­lion won ($31,492) for em­ploy­ees of the joint ven­ture (JV), which is less than half of the av­er­age 92 mil­lion won that ex­ist­ing Hyundai work­ers earn.

The plan was given a green light by the city’s con­sul­ta­tive body on Wed­nes­day on con­di­tion that Hyundai would re­vise cer­tain terms that al­low the JV to skip an­nual wage ne­go­ti­a­tions with its work­ers, a city of­fi­cial said.

Hyundai’s ex­ist­ing work­ers hold wage talks ev­ery year and of­ten resort to strikes to get a bet­ter pay.

Hyundai re­jected the city’s re­vised pro­pos­als.

“We hope Gwangju city will take ac­tions to re­store trust, so that we can pro­ceed with in­vest­ment dis­cus­sions smoothly,” the au­tomaker said in a state­ment.

The fac­tory that Hyundai and Gwangju are look­ing to build would have an an­nual ca­pac­ity of 100,000 mini-SUVs start­ing 2021. The pro­posal, how­ever, has raised ten­sions with Hyundai’s union­ized work­ers who fear the JV will lead to job losses and wage cuts.

The JV, a first for South Korea’s big­gest au­tomaker, will help Hyundai cut both costs and re­liance on union­ized work­ers.

It would also bet­ter align Hyundai with the gov­ern­ment of Pres­i­dent Moon Jae-in, which is strug­gling to keep man­u­fac­tur­ing jobs from mov­ing over­seas amid US Pres­i­dent Don­ald Trump’s threats to im­pose hefty tar­iffs on ve­hi­cle im­ports.

Gwangju is home to Hyundai af­fil­i­ate Kia Mo­tors’ fac­to­ries and the po­lit­i­cal strong­hold of the lib­eral Moon gov­ern­ment, which has made job cre­ation its top elec­tion pledge.

Hyundai is ex­pected to in­vest 53 bil­lion won ($47.5 mil­lion) for a 19% stake in the JV, while Gwangju will spend 59 bil­lion won for a 21% stake. The re­main­ing 167 bil­lion won will be pro­vided by sup­pli­ers and the lo­cal economy.


The JV, which the city gov­ern­ment said will cre­ate 12,000 jobs, has al­ready met with dis­ap­proval from Hyundai and Kia la­bor unions. The unions said they will idle fac­to­ries for four hours on Thurs­day.

Hyundai’s more than 50,000-mem­ber union on Tues­day warned of a full strike, fear­ing the move may take away pro­duc­tion and jobs from the com­pany’s plants in Ul­san and other cities.

Hun­dreds of union mem­bers wear­ing red head­bands ral­lied at Hyundai’s fac­to­ries in the south­east­ern city of Ul­san with ban­ners read­ing “South Korea’s auto in­dus­try will go bank­rupt.”

The pro­ject will lead to “bad jobs which bring down work­ers’ wages by half,” said Ha Buy­oung, Hyundai’s Korean union chief.

The la­bor union said an ad­di­tional plant will ex­ac­er­bate ex­cess pro­duc­tion ca­pac­ity at the au­tomaker, which is strug­gling with slug­gish ex­ports to the US and other coun­tries and posted a plunge in quar­terly net profit.

Hyundai’s Korean pro­duc­tion fell to 1.65 mil­lion ve­hi­cles last year, the low­est since 2009, data from the coun­try’s car as­so­ci­a­tion shows.

Kia’s union has also called for a with­drawal of the JV plan, say­ing it will add pres­sure to the niche, shrink­ing mini-ve­hi­cle seg­ment in which it holds a 69% share. —

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