Hyundai’s easily fixed problem

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Hyundai’s easily fixed problem

Hyundai has been walking a thorny path in recent months. While the weakening yen is making the automaker less competitive overseas, a massive recall for faulty brake lamp switches in the United States as tarnished its image. The situation is no different for Kia Motors, Hyundai’s affiliate.

But what’s probably hurting Hyundai most is the internal issue that has been a headache for the company and the auto industry for more than a month: weekend overtime payment negotiations with its labor union.

It’s a pity because this is one issue that could be solved unilaterally and quietly.

The differences between the management and the union over weekend payments caused the company to shut down assembly lines at its plants in Ulsan and Asan on Saturday and Sunday for six straight weeks. While the two sides butt heads, more than 41,000 vehicles were not produced on schedule as of last weekend, which cost the company 820 billion won ($725 million).

In fact, Hyundai’s domestic production in March plunged 20.7 percent year-on-year to 142,895 units.

And the situation is growing more painful by the day for Hyundai’s suppliers and the regional economy. Hyundai’s first-tier suppliers number nearly 400 companies, while more than 3,800 are second-tier suppliers. Representatives of these companies issued a statement last week saying the situation is threatening their survival.

The issue began with Hyundai’s implementation of two daytime shifts last month. Before the new system, Hyundai employees worked 10 hours in two shifts with the second group working overnight. But under the two daytime working shifts, the first group works eight hours and the second group nine.

The two sides also agree that the weekend overtime system should be the same as weekdays. Previously, employees worked 14 hours shifts in two days and received about 310,000 won. But since the new system allows employees to work 17 hours in two days, the union asked for more money and Hyundai offered 396,000 won.

However, sources said the union is asking for more than 450,000 won. Apparently the union wanted to keep the payment rate of old working system and additional allowances for working three more hours.

Even less understandable is the timing of the union’s demands, with productivity of Hyundai’s local plant declining.

When new working shifts were implemented, Hyundai and the union agreed to increase units per hour from 402 to 432, but it seems those promises are likely to be broken.

Hyundai is expected to boost overseas production to fill a production shortfall of 100,000 to 200,000 units at local plants.

Last year, Hyundai produced 2.5 million units outside Korea compared to 1.9 million here. More production overseas means jobs lost here.

To keep the local auto industry healthy, the labor union and the management need to find the common ground as soon as possible.

By Joo Kyung-don []
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