The Korean auto industry is yet again bracing for big trouble, with major unions moving to launch strikes over pay raises, bonuses and other benefits. There are several good reasons why they shouldn’t.
Most importantly, Korean automakers are in too bad a situation to suffer further losses. Their competitiveness and profits are falling due to weak domestic demand and sluggish exports.
The combined output of the nation’s five carmakers declined to 2.2 million in the first half of this year, the lowest since 2010. Their combined sales in June fell 14 percent from a year earlier.
The lackluster performance brought South Korea down to sixth place, behind India, in terms of the number of newly produced cars by a country. Some pessimists say Korea will soon be overtaken by Mexico as well.
Some companies, such as GM Korea, are already in deep trouble. Losses at the Korean unit of General Motors have grown to 3 trillion won ($2.6 billion) over the past three years.
Its recent performance raises greater concern. GM Korea’s domestic sales plunged 37 percent in June from a year ago. Analysts already raise the possibility of GM Korea becoming a target of the US parent company’s worldwide restructuring. It is simply ridiculous for its union to threaten a walkout to demand greater paychecks while the company may be headed into deeper crisis.
Korean automakers are also facing increasingly formidable challenges in the global market. Korean car exports have fallen for four straight years and the decline is conspicuous in major markets such as the US, China and Europe, where Korean automakers’ combined market share dropped to 5.8 percent in the first half of this year.
To make things worse, the diplomatic row with China over the deployment of the Terminal High Altitude Area Defense anti-missile system in South Korea is taking a heavy toll on firms like Hyundai and Kia.
Sales of Hyundai and Kia cars in China plummeted by about 60 percent and 50 percent, respectively, in the first half of the year. Workers with any sense should not demand as much as 30 percent of net profits in bonuses when sales of cars produced by their companies are suffering so massive a drop.
Bleak prospects of external conditions further reduce room for strikes.
One case in point is the US’ demand to revise its free trade agreement with South Korea.
US President Donald Trump, who called the Korea-US FTA a “horrible deal” that only kills American jobs, spoke of a revision to the agreement in recent summit talks with President Moon Jae-in.
Trump highlighted the imbalance in the number of Korean and American cars sold in each other’s country. Korean automakers may well have to encounter higher export barriers to the US market and/or fiercer competition with American brands in the local market.
The free trade agreement between Japan and the EU -- the Economic Partnership Agreement -- is also set to toughen Korean carmakers’ exports to the European market in two years’ time.
Another issue with autoworkers’ walkout plans is that they are part of radical labor groups’ endeavors to seize control of labor affairs on the strength of a liberal government in power.
Calling on President Moon to reward them for their support during the election, militant labor groups like the Korean Confederation of Trade Union have already been waging a politically motivated campaign to protect their interests.
The KCTU has observed a weeklong “social general strike” and the metal workers’ union, the largest member of the KCTU, plans to launch a “social solidarity general strike” from July 19-26.
Furthermore, GM Korea’s union has already voted for a strike and Hyundai workers will be casting ballots Thursday and Friday. Kia workers will follow suit later this month.
Since his election, Moon has not taken on major labor issues. His nomination of labor minister is still stuck at the National Assembly. In light of the situation, the president should come forward and tell unions that this is not the time for labor disruptions. Otherwise, he will encounter a lot more demands from labor groups.