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Renault Samsung Suppliers Fear Chain Bankruptcy Due to Prolonged Strikes
Parts Suppliers in Despair
Renault Samsung Suppliers Fear Chain Bankruptcy Due to Prolonged Strikes
  • By Jung Min-hee
  • December 31, 2019, 09:10
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An auto assembly line at Renault Samsung's Busan plant

The fear of chain bankruptcy is growing among auto parts suppliers for Renault Samsung Motors as an auto part company in Gangseo-gu, Busan has decided to close down its business.

They had to discontinue production from late 2018 to June 2019 due to prolonged strikes of the carmaker’s labor union. They could breathe a sigh of relief when the carmaker’s production line normally operated for recent several months. After just six months of normal operation, however, they feel frustrated again as another round of strikes started.

The automaker’s labor union went on full and partial strikes for as long as 312 hours from October 2018 to May 2019 regarding the wage and collective bargaining negotiations for 2018. Renault Samsung estimated the loss from the labor-management dispute at a whopping 350 billion won (US$302.6 million). After many twists and turns, the labor union reached an agreement with the management and withdrew from a strike in June. Just six months later, however, the union launched a partial strike on Dec. 20 concerning the 2019 wage and collective bargaining deal, and is now staging a full-scale strike.

Renault Samsung’s output has plunged from 215,000 units in 2018 to 160,000 units in 2019, and is expected to fall to around 130,000 units next year, said Na Ki-won, chairman of the Renault Samsung Supplier Association (RSSA). He said with a sigh, “Strikes have never stopped and the plant has yet to conclude manufacturing contracts with Renault and Nissan. We are deeply concerned about our future.”

Smaller companies that supply components to Renault Samsung are in despair. They are suffering from difficulties that cannot be resolved by themselves, so they only wait and watch day after day. A representative of an auto part company said, “Most Renault Samsung partners supply their components to Renault Samsung alone, so they will suffer a severe blow unless they secure supply contracts with it.” He added, “As we cannot intervene in the labor-management negotiations, we feel helpless.”

It is technically impossible for Renault Samsung parts suppliers to search for a contractor other than Renault Samsung because component companies are vertically merged into a car maker.

Suppliers that have expanded production facilities or workers for the XM3, a new model that Renault Samsung plans to mass produce next year, are on pins and needles. If they fail to secure production orders as scheduled due to prolonged standoffs, they could face bankruptcy.

In the midst of this turbulence, however, the labor union is determined to go on strike until Dec. 31 as originally scheduled. The strike participation rate is falling day by day, but the union leadership refuses to budge. The participation rate stands at 30.1 percent, the lowest since the union began an all-out strike on Dec. 23. More than half of the union members who had already voted in favor of the strike went to work. Moreover, a number of employees worked overtime on holidays, producing 547 units, almost a hundred more than 451 units that had been originally estimated.