Hyundai’s horizon looking stormy

Hyundai Motor Co. is driving onto another rough road this week as its militant union resumes negotiations for higher wages and better working conditions, and its chairman, Chung Mong-koo, is still appealing his conviction for embezzlement.
Hyundai and the 44,000-strong union appear to be heading for a showdown even before the resumption of negotiations, which are set for Wednesday and Thursday in Ulsan, where the company has a major factory. The union is seeking an 8.9 percent increase in basic salary and demanding the automaker pay 30 percent of its 2007 net profit as a bonus for union members. The union is also requesting the company raise the retirement age to 60 from the current 58, according to the union’s Web site.
In return, Hyundai, fed up with problems such as a strong local currency and weak sales overseas, is demanding the union agree on flexible allocations of “surplus workforce” and a reduced number of holidays, the union said. Hyundai is also asking the union to scrap its previous agreement, which requires the automaker to shut down its overseas plants first if the company faces a potential bankruptcy.
“Job security is one of our top priorities in wage negotiations this year,” said union President Lee Sang-wook.
Strikes over higher wages and better working conditions have been almost an annual ritual for Hyundai, Korea’s top automaker and the sixth-largest in the global market with its affiliate Kia Motors Corp.
Last year, unionized workers at Hyundai laid down their tools for a total of 33 days, causing 1.3 trillion won ($1.4 billion) in lost sales.
During the second quarter of this year, Hyundai’s net profit jumped around 50 percent from a year ago to 611 billion won, driven by aggressive cost-cutting efforts and strong sales at home. Despite this positive result, analysts pointed at Hyundai’s weak sales abroad as the won’s strength and fierce competition with Japanese automakers continued to undermine its momentum. Hyundai generates more than two-thirds of its revenues overseas.
Sales of Hyundai cars in the U.S. fell 7.8 percent last month. Hyundai also saw its sales in China plummet almost 32 percent in July.
However, what worries analysts most is poor labor relations.
“The biggest hurdle for Hyundai Motor now is a possible labor-management dispute in August,” said Suh Sung-moon, an analyst from Korea Investment and Securities Co. “If the union stages walkouts this year like last year, Hyundai Motor’s earnings will deteriorate further,” Suh said.
Critics and union leaders accuse Hyundai’s Chairman Chung of expanding overseas plants to avoid labor strikes at home. The 69-year-old chairman is now facing possible jail time as he was convicted and sentenced to three years in jail in February for embezzling some $100 million in company funds to bribe and lobby government officials.
Chung is appealing the jail term, with the next court hearing to be held on Aug. 27. Yonhap