Labor strike raises concerns about profit losses

Labor unions of the nation’s automotive and shipbuilding conglomerates started their partial strikes Tuesday, and the possibility of delayed orders and profit losses is worrying industry insiders.

Union members of Hyundai Heavy Industries (HHI) walked off work for three hours on Tuesday along with the union of Hyundai Motor, which walked off work for four hours on the same day.

The strike is due to grow bigger for shipbuilders today, as eight labor unions in the shipbuilding industry are combining forces to protest their companies’ restructuring plans. A relay of strikes due to continue until Friday is putting conglomerates and partner suppliers in a pinch over concerns of possible profit losses.

“If the labor unions leave work for four hours, it could cause a production loss of 1,700 cars a day and translate into a 40 billion won [$35 million] loss each day, with calculations based on the average cost of cars,” a Hyundai Motor Group spokesperson said.

For HHI, the strike could affect a shipbuilding deal that the company signed with New Zealand. The country’s navy approved the purchase of a tanker to replace its 30-year-old Endeavour at a cost of $500 million.

“I think it will be a concern that the state of industrial relations of the Hyundai Heavy Industries has been as bad as it has over the last three years,” Labour Party lawmaker Phil Goff told Newshub, a New Zealand media outlet. “It’s certainly a risk factor.”

Recognizing the negative publicity, labor unions that have not yet walked out are showing cautious responses to upcoming strikes.

The workers’ committee of Samsung Heavy Industries said it will participate in the joint strike by shipbuilders’ unions but left room for compromise. It said that if negotiations with the company go well, it may not join the strike.

The union of Daewoo Shipbuilding & Marine Engineering (DSME), which has been free from labor disputes for the last 25 years, said it is open to both a strike and negotiations with the company.

The embattled shipbuilder is in need of another cash injection worth 1 trillion won from its creditors, but if the labor union participates in a strike, the support would be cut.

Labor unions already on strike claim the walkout will not have a critical impact on actual production.

“In the actual shipbuilding scene, there are three to four times more workers from supplying companies than union members, so even if all of the union members walk out, manufacturing facilities will run fine,” an HHI labor union member said.

“The estimation of 40 billion won in losses for a four-hour strike is excessive, and we believe the real loss comes to around 20 billion won,” a Hyundai Motor labor union member said.

Despite simmering labor disputes, shipbuilders have still been inking orders in the past week. DSME has begun construction on an oil production plant worth roughly $2.7 billion, and HHI won a $101.6 million order to supply vacuum vessel sectors.

BY KIM JEE-HEE, MOON HEE-CHUL [kim.jeehee@joongang.co.kr]