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Hyundai Motor took another step into the mire on Friday when its labor union blocked a company move to introduce a two-shift work system at Hyundai's commercial vehicle factory in Jeonju, North Jeolla Province. Union members voted down the shift system despite two previous temporary agreements between the union and management. As a result, it seems unlikely that the two sides will agree to meet for negotiations in the near future. The latest union crisis comes after Hyundai's management in January caved into union demands for year-end bonus payments.
According to experts, three factors will determine if Hyundai can continue to grow as a global automaker: the won-dollar exchange rate, which risen 28 percent over the past two years, labor relations, and its questionable productivity. Ahn Soo-woong, an analyst at Woori Investment & Securities, said, "At Japanese car companies, management and labor have reached a consensus that high wages should be contingent on high productivity. Unless their productivity issues are resolved, it will be difficult for Korean companies to compete with Japanese rivals."
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Production lines stand still amid a partial strike at Hyundai Motor's Ulsan plant on July 20, 2006.
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¡ß Jeonju Plant Unable to Take Overseas Orders
Hyundai has been trying since May to introduce the two-shift system at its Jeonju plant because its current system, producing 50,000 units per year, can't keep up with orders. Hyundai planned to implement the system at its bus production line first, then gradually introduce it to its truck, engine and components lines in an effort to produce 100,000 units per year at Jeonju. The union has blocked the plan for almost a year.
Jeonju has stopped taking overseas orders because it can't meet demand. If it did take orders, it is estimated they would take eight or nine months to be fulfilled. Choi Han-young, Hyundai Motor's president of commercial vehicles, is anxious about his company's future. "We can't take orders at all. We are losing customers right before our eyes," he said.
The impact of the union's rejection isn't limited to Hyundai -- the company's suppliers will also be prevented from selling more of their goods. If Jeonju Plant introduced a second shift, it could take on more than 3,000 new workers and the resulting demand for parts and services would mean another 8,000 to 9,000 new jobs at Hyundai's affiliates. That means Hyundai's union is blocking the creation of more than 10,000 potential new jobs.
¡ß Rejection of Two-Shift "Unimaginable" Overseas
The two-shift system is common at auto plants around the world. An analyst who worked as a production manager at a GM plant in Michigan, the U.S., said, "Around-the-clock work schedules are fundamental at auto plants. It would be unimaginable for unions at American auto plants to reject the two-shift system in the face of an order rush." Ellen McNair, the director of corporate development for the Montgomery Area Chamber of Commerce in Montgomery, Alabama, where Hyundai Motor's Alabama plant is located, said, "Here, we are conscious only of production. But Korean automakers have a more urgent issue: unions."
¡ß Unions Dictate Their Company's Fate
The fact that labor unions can sway an automaker's fate has been confirmed by recent history. In the mid-1980s when the yen soared to more than double its value in the wake of the Plaza Accord of 1985, an agreement reached by finance ministers of the G5 countries, Toyota saw its overseas trade drop sharply and its operating profit margins dwindle.
But Toyota managed to overcome the crisis thanks to cooperation between labor and management. Toyota tightened its belts, expanding production overseas and slashing costs at home. Instead of striking, its unions worked harder to increase productivity. In contrast, American automakers such as GM and Ford suffered from chronic labor disputes and saw their credit ratings fall to speculation-grade levels. The number of United Auto Workers (UAW) members has dropped sharply from 1.5 million in 1974 to 500,000.
A Hyundai Motor official said, "If they want to continue to survive with their high annual salaries, workers should increase their productivity. Unless that is done, neither the workers nor their company will survive."
(englishnews@chosun.com )
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