Hyundai Motor union members chant slogans in front of the main building of Hyundai’s Ulsan plant in Buk-gu, Ulsan. Yonhap News
Labor risks at Hyundai Motor (005380.KS) are mounting after a labor relations commission ruled that the carmaker must bargain directly with its in-house subcontractor unions. With wage negotiations with the prime contractor’s union already struggling, the addition of external variables has left the company facing a crisis of troubles both at home and abroad. The prime contractor’s union is demanding 30% of last year’s net profit, while also vowing to strike unless employment concerns stemming from the introduction of humanoid robots and plant reconstruction are resolved.
According to the industry on Wednesday, Hyundai Motor’s union said it had failed to reach an agreement with management in this year’s wage negotiations and filed a request for labor dispute mediation with the National Labor Relations Commission the previous day. The commission’s decision is due by the 25th, and if mediation is not reached by then, the union will gain the legal right to take industrial action, including a strike.
The problem is that the gap between labor and management is wide, making mediation unlikely. The union is strongly demanding that 30% of the net profit Hyundai Motor earned be paid as performance pay. Given that Hyundai Motor posted net profit of 10.3648 trillion won last year, a simple calculation means the union is asking for more than 3 trillion won in performance pay.
Management, however, is reluctant, saying it lacks the capacity to pay given deteriorating earnings this year. In fact, Hyundai Motor’s first-quarter operating profit fell 30.8% from a year earlier to 2.5146 trillion won. Management’s position is that meeting the union’s expectations would require giving away all the operating profit earned in a single quarter, making it difficult to accept.
The company’s sense of crisis is especially acute as earnings continue to weaken, with sales last month in the home Korean market plunging 23.1% from a year earlier amid a domestic market slump. During wage negotiations with the union, management said, “There is no change in our stance that ‘where there is performance, there is reward,'” while adding, “Given that first-quarter operating profit fell more than 30%, there is a need to discuss performance pay that matches earnings.”
Regarding management’s plans to deploy humanoid robots such as “Atlas” on the production floor, the union maintains a hardline stance, demanding that employment stability measures be presented first. The current production-line wage system operates as a monthly salary based on hourly wages, but the union wants a “full monthly salary system” introduced first, guaranteeing a fixed wage regardless of working hours. The logic is that if productivity improves with the introduction of robots, overtime and extra shifts could disappear, reducing wages.
Management is trying to placate the union by saying robots will be deployed first at overseas production bases such as those in the United States, but the union is not backing down. This is because if work concentrates at more productive overseas plants, domestic work could become scarce.
Labor and management are also running on parallel lines over the issue of reconstructing aging plants. Hyundai Motor is pushing a plan to reorganize the entire Ulsan Plant No. 1 and Line 2 of Plant No. 4 into an automated factory with an annual production capacity of 250,000 vehicles.
But the union takes a critical stance, citing the possibility that higher levels of factory automation could increase employment insecurity. The union is also demanding paid leave that guarantees wages during the reconstruction period.
With the gap between labor and management failing to narrow, the company’s concerns are deepening as the in-house subcontractor issue overlaps. On the 15th, the Ulsan Regional Labor Relations Commission ruled, in a case filed against Hyundai Motor by the Hyundai Motor non-regular workers’ branch affiliated with the Korean Metal Workers’ Union and others, to the effect that “Hyundai Motor must engage in bargaining directly.”
Those subject to bargaining include not only non-regular workers who assemble vehicles in the plants, but also Hyundai Greenfood, which operates cafeterias on the premises, and the Hyundai Motor security branch, which handles plant security and guard duties.
In addition, Hyundai Motor’s union has raised the pressure by speaking in unison with the subcontractors, saying, “The real decision-maker is the prime contractor, and the prime contractor must bear the responsibility.” For management, this means having to respond to all the scattered demands of both the prime contractor’s and subcontractors’ unions.