What Good Can Come Out of the Strike?

After Hyundai Motor workers vote to authorize a strike against their company, concerns arise over the weakening of overall competitiveness in the Korean motor industry. Furthermore, as the management looks into extraordinary countermeasures of increasing production abroad, critics point out that the union is driving out employment overseas. This could lead to contraction in the Korean motor industry, ultimately resulting in job insecurity and lowered wages.

“Among the 46,027 members, 40,537 participated in the vote, and 32,595 (80.4%) voted for a strike, authorizing it,” announced the union through its newsletter on August 14. “We will fight for, and win, the ‘4.4.5 Key Demands’ through this strike. The company must show its willingness to accept the union members’ demands by August 19,” it added.

The union’s demands include several sections that are tough to accept. Profit sharing of 30% of Hyundai Motor’s net profits and monetary support of 10 million won for the children of employees who could not matriculate to college are some such demands. Hyundai Motor analyzes that accepting such demands will lift the average wage per worker to over 100 million won (US$89,400), posing a serious threat to the company’s overall competitiveness. Progressive increase in severance pay, extending the retirement age to 61, and exemption of criminal and civil responsibility regarding union activities are some of the other demands that cannot be accepted by the company, as they go against government policies and the legal system.

In effect, it is realistically unlikely that the company’s response will satisfy the union’s demands by August 19. The union will have no choice but to uphold its decision and proceed with the strike.

Productivity in Korea is markedly lower than its foreign counterparts

While the union is making unrealistic demands for their rights, their productivity is failing.

The Line of Balance (LOB) at Hyundai Motor’s Korean factories, a key productivity metric, remains around 53.4%. This means that a hundred workers are only doing the work of 53.4 workers. US factories have a LOB of 91.6%, approximately 1.7 times that of Korean factories. Factories in China have a LOB of 86.9%, India 88.4%, and the Czech Republic 90.6%, all well over that of Korean factories.

Hyundai Motor’s hours per vehicle (HPV), which measures production time for a single vehicle, is also markedly higher than its foreign counterparts and competitors. Hyundai Motor’s Korean factories have an HPV of 31.3 hours, while the factories in Alabama, US have an HPV of 14.6 hours, and Beijing, China 19.5 hours. It is significantly higher than Nissan (18.7 hours) and Ford (20.6 hours) as well.

Hyundai Motor looks into increasing production abroad 

Hyundai Motor is looking into extraordinary countermeasures of increasing production abroad should the strike begin to affect production. If the company acts on this plan, jobs in Korea will decrease as a result.

Last year, the union entered a 13 day partial strike and refused seven days of overtime work, incurring a production delay of 82,000 units, equivalent to 1.7 trillion won (US$1.52 billion) of monetary losses. From March to May, the union refused 11 days of holiday overtime work, incurring a production delay of 83,030 units in 1H 2013. The union’s full strike will again cause major delays in production.

Hyundai Motor is expected to see huge losses for not meeting its supply volume. Hyundai Motor manufactures 42.2% of its products domestically, which is higher than its competitors such as Ford (38.9%), Toyota (38.8%), and GM (26.4%).

“Our customers won’t wait until Hyundai cars are out,” said Hyundai Motor personnel. “Earlier this year, we increased production abroad in response to the union’s refusal to work overtime on weekends. If the union goes on strike, we’ll have to play that card again,” he added. Some point out that union power will begin to weaken not too long from now. “The union obsessing over short-term benefits will soon pose a threat to the entire Hyundai Motor Corporation and the union. Everyone knows that the union’s excessive demands will lead to a decline in overall competitiveness, which will then result in wage cuts and employment contraction,” pointed out an industry personnel.