Bargaining done, the work beginsThe labor union of the country’s largest automaker Hyundai Motor has approved the collective bargain deal its representatives struck with management. After more than 100 days of negotiations against the backdrop of on-and-off partial strikes, Hyundai management agreed to raise base salaries of permanent workers by 97,000 won ($92) a month, making unionized employees’ average annual pay nearly 100 million won. The automaker also agreed to maintain annual output at its local manufacturing base at 1.74 million units to ensure job security.
In return, the union withdrew its demand for 10 million won payments to employees whose children do not enter college to balance out company tuition subsidies, a one-time bonus tantamount to 30 percent of last year’s record net profit and union approval of overseas expansion of existing plants and new facilities. It is fortunate the two sides ironed out their differences, as temporary walkouts have already disrupted production of 50,000 units.
The union compromised with management after the latter warned it would increase output overseas in order to make up for the shortfall at home. It also turned sensitive to the chilly response from media and the public to what was seen as excessive benefit demands at a time when most other Korean workers are struggling amid the economic slowdown. Wages are normally based on the rate of economic growth, productivity, inflation and collective bargaining skills. But the union of Hyundai Motor for the past 20 years employed the best of its die-hard negotiating prowess to win wage increases well beyond the inflation rate.
However, their negotiating power hit a wall due to lagging productivity. Output and profitability of the Ulsan manufacturing headquarters plant lag far behind that of the company’s overseas plants, as well as rival automakers. Management should be held at least partly accountable for empowering its union. Over the years, management gave in to unreasonable union demands to wrap up negotiations as soon as possible.
Hyundai Motor is challenged at home and abroad. It competes with cheaper and brand-competitive imported cars at home and is struggling against Japanese and American rivals in overseas markets. Despite its growth in scale, operating profit has sharply fallen. Moreover, it is losing its customers’ confidence at home. Local consumers will no longer tolerate selfish labor deals at Hyundai Motor. With this year’s ordeal thankfully over, Korea’s flagship automaker now must work toward improving domestic productivity and regaining consumer confidence.