Productivity is the priority

The labor union of Hyundai Motor elected Lee Kyung-hoon, who helped to maintain a strike-free workplace, as its new leader. Hyundai Motor had its longest stretch of uninterrupted production during Lee’s term from 2009-11. He is seen as a moderate compared to his predecessors, but reaped more than a few benefits, nonetheless. While bargaining to keep factory lines rolling without walkouts, he won wage increases equal to those in strike-ridden 2012. He also made management reward union workers with 30 to 40 shares each year and offer jobs to the offspring of long-term employees. It remains to be seen what direction the new leadership will take one of the country’s largest industrial sites.

Hyundai Motor has fared well since the financial crisis, but it has a poor reputation at home. Its union group has been criticized for being greedy at the expense of nonpermanent and overseas workers. The carmaker also is resented by subcontractors for domineering and unfair business practices. The company’s management and labor may hate to admit it, but it is the hidden truth behind its glory. Its practices do not fit its global status as the world’s fifth-largest automaker with 47,000 union members. Management and the new labor leadership must address the problem if they don’t want to lose market confidence.

Management and labor must remember the U.S. lesson of June 1, 2009. On that day, 100-year-old General Motors filed for liquidation. U.S. media said the automaker had it coming because of reckless strikes and its neglect of consumers. It went broke because it simply lost competitiveness. In return for a government bailout, it had to fire 29,000 employees. Under Bob King, the GM union became an ally instead of an adversary to the company and was reborn as a lean and efficient enterprise.

Poor productivity at the Ulsan factory of Hyundai Motor is no secret. It lags behind not only Toyota and Ford, but also the company’s overseas manufacturing operations. That is the by-product of record salary increases and repeated strikes. Hyundai Motor cannot stay competitive with a confrontational management-labor relationship.

The global auto industry is evolving. Labor relations have served as the impetus. France was famous for its powerful unions and slipped to 10th from third in global rankings. Italy’s Fiat is considering relocating manufacturing to the United States. In contrast, Toyota, German and U.S. automakers are doing well because of stable labor relations. Employees and employers at Hyundai Motor must choose whether they want their company to backtrack or move forward.