A Double Whammy for Hyundai Motor Group
Hyundai Motor Group, which has been increasing its market share in the global automobile market by aggressively launching new models despite the COVID-19 pandemic, is facing a crisis due to an unstable supply of automotive semiconductors and labor-management conflicts.
The group recorded its best-ever business performance in the U.S. market in April, with sales soaring 127.1 percent from the same month of 2020. However, the company fell into a crisis due to production disruptions caused by a shortage of semiconductors and labor-management conflicts over a plan to build an electric vehicle plant in the United States.
Hyundai Motor suspended the operations of production lines at Ulsan Plant 5, which produces the Tucson and the Nexo, from May 17 to 18 due to an unstable supply of semiconductors for airbags. Ulsan Plant 3 which produces the Avante and the Venue also will stop operating on May 18 and 20. A shortage of semiconductors for airbags also forced Kia Corp. to suspend Soha Plant 2, which produces the small SUV Stonic, on May 17 to 18.
Hyundai Motor stopped producing the Porter at Ulsan Plant 4 from May 6 to 7 due to a shortage of semiconductors for dash boards. In April, the carmaker stopped Ulsan Plant 1 from May 7 to 14, Asan Plant from May 12 to 13 and from May 19 to 21 due to a shortage of semiconductors. Industry insiders are predicting that the semiconductor supply situation will be resolved as early as the fourth quarter.
Amid production disruptions, a labor-management conflict is also looming as a new risk. The labor unions of Hyundai Motor and Kia Corp. strongly opposes Hyundai Motor Group's plan to invest US$7.4 billion in the U.S. market over the next five years to produce electric cars there. They are concerned that Hyundai Motor Group’s overseas investment and local production in the United States will weaken the automaker’s investment in Korea.
The Hyundai Motor Branch of the National Metal Workers' Union issued a statement on May 17 saying, "We clearly oppose the company's unilateral investment plan. Rather than expanding overseas factories, Hyundai Motor will strengthen its high value-added domestic plants and invest its fourth industrial new industries in domestic factories."
"If the investment plan is a gift for the United States ahead of a summit between Korean President Moon Jae-in and U.S. President Joe Biden ahead of the Korea-U.S., the plan should be criticized more strongly," the Hyundai Motor Union said. “If the management implements the U.S. investment plan despite the labor union’s opposition, it will totally destroy labor-management harmony.”
The Kia branch of the Korea Metal Workers' Union also claimed in a newsletter issued on the same day that Hyundai Motor Group Chairman Chung Eui-sun should devise measures to address a youth unemployment issue and stabilize employment by investing in domestic factories."
"The management has to put measures to allocate production of electric vehicles and hydrogen cars early to domestic factories and produce core parts in Korea before the construction of overseas plants for the job security of 30,000 union members,” the labor union emphasized.
Auto industry experts analyze that Hyundai Motor Group’s investment in the United States and production of electric vehicles in overseas plants are likely to trigger a labor-management conflict as the labor unions of Hyundai Motor and Kia Corp. included job security measures in light of industrial changes such as an extension of retirement ages and electrification in addition to an increase of 99,000 won in basic salaries, the use of 30 percent of profits as performance-based bonuses for unionists.