The latest work stoppage by unionized workers at Hyundai Motor and the way it was settled shows why the automaker is plagued by chronic labor disputes that severely cut into its competitiveness.
The latest conflict surrounds the company’s plan to expand production of a new popular small sport utility vehicle, the Kona, which was launched in June.
The management and the union, which had already spent three months on negotiations before the Kona’s launch, started last month talks on the plan to add an assembly line to its production at a plant in Ulsan.
But the negotiations made little headway as the union insisted on demands that had little to do with issues that needed to be dealt with under the collective agreement.
Then the company pushed ahead with the production of Kona vehicles in the second assembly line, to which the union responded with a stoppage of both assembly lines. Union members even used chains to shackle the assembly lines.
All these troubles came at a time when the world’s fifth-largest automaker is struggling with sluggish sales at home and abroad. The recent diplomatic row with China over South Korea’s decision to deploy a US missile shield system further dented the company’s bottom line, as Hyundai car sales in the country in the first 10 months of the year plunged more than 37 percent from a year ago.
Overall, Hyundai sold 3.27 million cars in overseas markets in the first three quarters of this year, a drop by 6 percent from a year earlier. Operating profit in the same period plummeted 8.9 percent to 3.8 trillion won ($3.5 billion).
Increasing sales of the Kona, one of the few vehicles for which consumer popularity is growing, was part of Hyundai’s efforts to fight the decline. The workers’ actions only impeded the company’s plan to ship the first batch of Kona vehicles to the US early next month.
As usual, the union’s demands exceed the reasonable level. Workers demanded that windows be installed at the second assembly line, that they make some parts currently provided by suppliers, and even the relocation of assembly line supervisors to other workplaces. None of these things have anything to do with issues to be dealt with under the collective agreement.
What had seemed good was that the company, which used to go easy on illegal activities by the union for the sake of minimizing lost production, was seen taking firm action against the union.
CEO Yoon Gap-han said publicly Tuesday afternoon that this time, the company would take legal action – both criminal and damages suits – and will abide by the principle of “no work, no pay” by refusing salaries to workers who participate in the walkout.
But the company changed its mind and gave up operation of the new Kona assembly line, which led the union to call off the strike that had impeded the plant for nearly two days.
Again, the auto giant missed an opportunity to cut off the vicious circle in which unionists commit illegal activities, and the company takes -- or threatens -- legal action against them, but eventually takes a step back for a “peaceful settlement.”
Such an attitude has emboldened the union to seek even more gains at the expense of the company’s competitiveness. It is no wonder workers’ productivity at the seven plants in Korea is lower than their counterparts in Hyundai plants in the US, Europe, China and India.
Recurring labor disputes at Hyundai would not only drag the company into deeper trouble but also impact many of its suppliers.
The latest case should shed light again on the need to make effective labor reforms that expand labor market flexibility and curb large unions from protecting their vested interests at the expense of their own companies’ competitiveness.