Still a Long Way to Go to Normalize Busan Plant
The management and labor union of Renault Samsung Motors Corp. have reached a tentative agreement on wages and working conditions for 2018, 11 months after they began negotiations in June last year.
Renault Samsung said the two sides have dramatically come up with a tentative deal. However, it still has a long way to go before normalizing the Busan plant. The company faces a steep decline in production due to a prolonged conflict with the labor union.
The labor union will vote next week on whether to accept the deal and the company has to reach an agreement with the labor union on wages for this year again and secure work to do.
The South Korean unit of French automaker Renault S.A. said the two parties struck a tentative agreement on May 16 at the 29th round of talks which began a day earlier. The collective bargaining terms would be put to a vote by unionized workers on May 21.
The management and labor union have reached an agreement in 11 months after both parties took a step back and found a middle ground on details, including base pay.
First, the labor union has accepted a base pay freeze and the management would offer an additional incentive of 500,000 won (US$420) in return. The two parties have agreed on a 1 million won (US$840) bonus and a 35,000 won (US$30) raise in monthly meal allowances proposed by the management. Incentives would total 9.76 million won (US$8,202), including 4.26 million won (US$3,580) of profit sharing (PS), 3 million won (US$2,521) of productivity incentive (PI), 1 million won (US$840) of incentive for securing production volume from the parent company, and 1 million won (US$840) of special incentive on the settlement of the wage negotiations, with 50 percent handed out as productivity incentive payment.
In addition, the management would improve the relocation procedure for production workers and ease off the level of workload by injecting vocational trainees. It would also invest 1 billion won (US$840,336) in facilities to prevent musculoskeletal system disorders and activate a committee to improve working conditions as well as extend lunch time to 60 minutes from 45 minutes.
If the tentative agreement on wages for 2018 is finalized through the vote by unionized workers, Renault Samsung is planning to focus on securing a new production volume.
The company’s Busan plant produced a total of 210,000 cars for domestic demand and export last year but it is expected to see its production volume decrease at least 20 percent this year. This is because labor strikes in the process of wage negotiations have resulted in manufacturing delays and caused Renault Samsung’s parent company to slash the order of the Nissan Rogue, a mainstay of the Busan plant, to 60,000 units this year from last year’s 100,000.
The headquarters of the Renault decided not to extend its contract for the Rogue once it expires in September and has put off the decision whether to let the Busan plant secure production orders for the XM3 compact sport utility vehicle (SUV) for export to Europe until the first half of this year from March. Renault Samsung is a strong candidate to produce the XM3 for global sales. An official from Renault Samsung said, “When the tentative deal is finalized, it will meet the requirements to receive new orders from the headquarters. We are planning to continuously ask the headquarters to arrange new production orders, citing the competitiveness of the Busan plant, such as labor productivity and technical skills.”
Under the circumstances, this year’s wage agreement is considered one of the key challenges to achieve a complete normalization of the Busan plant. The management and labor union of Renault Samsung will begin wage negotiations for 2019 next month at the earliest.