Unreasonable labor unionsJob numbers depend on market demand for products and services. Global automakers vie fiercely to win over consumers across the world through new models and competitive prices. Stable labor relations have become critical to ensuring the competitiveness of a carmaker contending in the global market.
A reasonable wage standard based on the company’s competitiveness, and flexibility in labor that allows for changes in response to demand, becomes pivotal in the viability of an automaker and the industry. That is why automakers shift their manufacturing lines and jobs to regions and nations with favorable and cooperative labor terms.
Korean automakers are up against the most contentious and inward-looking factory workers. There are few markets that condone militant strikes, make replacement workers illegal, and keep labor flexibility to a minimum by blocking temporary or agency workers from being hired and protesting changes in work hours. Instead of reasonable negotiations and compromise, workers resort to practices seldom witnessed in foreign assembly lines such as walkouts and irrational wage demands. Automobile output from Korea has naturally taken its toll.
The output from Korean car assembly lines was reduced by 333,000 units to 4.2 million last year from 4.6 million in 2012. On the other hand, output and hiring are on the rise in markets with improved or customarily solid labor relations. Output increased by 1.9 million units in the United States over the last four years. During the same period, output grew 262,000 units in Germany, 288,000 units in India, 596,000 units in Mexico and 910,000 units in Spain.
In China, output ballooned by 8.8 million due to its explosive domestic demand. Production fell despite growth in domestic demand, making Korea surrender its No. 5 rank in output to India last year. The payroll at Korean automakers remains unchanged, but mostly due to a court order requiring non-permanent jobs to shift to a permanent payroll after a certain period. Enforcement of the order would weaken long-term competitiveness of local manufacturers and reduce jobs.
The outlook for this year’s global car market is dim. Worldwide demand is estimated to grow around 2 percent. Korean producers that mostly rely on small sedans for revenue are heavily chased by rivals from developing markets like China, India and Mexico. The U.S. market is uncertain due to Donald Trump’s “America First” agenda. Korea is incurring deficits in the automobile trade with the European Union. The emerging markets of Russia, Latin America and the Middle East remain stagnant. The Southeast Asian market is hard to crack as the region is dominated by Japanese brands.
Trump, who was elected with an ambitious agenda to revive American industrial power through increased hiring and production, specifically targeted the automobile industry as the poster child for his campaign. Assembly lines in the southern states are traditionally free of labor disputes, and workers of the backbone industrial northern have become flexible in wage and hiring terms. General Motors was able to easily make cost-cutting measures, dismissing part-time workers and moderating capacity and work hours late last year.
Korea, too, should revamp the labor sector to boost output and jobs and reinforce the automobile industry. Unreasonable wage demands and strikes could become fatal for the weakening industry. Automakers’ unions are fattening themselves at the expense of workers at auto parts suppliers and jobless young people. At the end of the day, they, too, could be out on the street if their companies lose competitiveness.
The rigid 30-year-old labor management framework has become dinosaurian. Employees and employers should work toward redesigning wage, work and hiring terms in a balanced and reasonable manner, and in accordance with international standards to enhance the competitiveness of Korean car brands.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, Feb. 6, Page B10
*The author is president of the Korea Automobile Manufacturers Association.