Labor disputes are looming large over local carmakers, except for Ssangyong Motor.
At Renault Samsung Motors, the labor union has staged 62 partial strikes since October last year. At GM Korea’s R&D firm, the union has resolved to strike. At Hyundai Motor, the union has vowed to launch a general strike if the National Assembly discusses a bill to amend the country’s labor law.
South Korean carmakers’ unions strike almost every year ahead of wage negotiations or collective bargaining to set working conditions. If they do so again this year, the impact will be far-reaching because car sales have been sluggish in recent years. Thousands of parts suppliers will inevitably experience shattering effects.
Of course, unions exist to pursue better working conditions and higher wages. But some of their demands go beyond the scope of labor negotiations and reveal a selfish attitude that ignores the realities of the national economy as a whole. The Hyundai Motor union demands that the company recruit 10,000 regular workers to replace retirees. Even though recruitment is a personnel matter to be determined by the management in consideration of its corporate strategy and business conditions, the union is telling the company what to do. This only harms investment sentiment. Korean carmakers’ employees already receive higher salaries than average workers. Perennial strikes undermine business performance and will boomerang on unions in the long run.
Unions need to pay attention to the examples of Ssangyong Motor and Renault Samsung.
Renault Samsung temporarily shut down its plant in Busan on Monday and Tuesday. This was a response to Nissan’s decision to reduce the subcontracted production of its SUVs at the plant. Nissan reportedly took that step due to output disruptions caused by prolonged strikes at the plant.
Until 2017, there had been no strikes at Renault Samsung for three years. But strikes became a frequent occurrence after a militant union leader was elected in December last year.
Those strikes have left a costly aftermath. The production loss amounted to 14,320 vehicles. The number of cars sold in the first quarter of this year and the fourth quarter of last year plunged 39.6 percent and 22.7 percent year-on-year, respectively.
In past years, the Ssangyong Motor labor union was belligerent. Its members occupied a plant in Pyeongtaek, Gyeonggi Province, for 77 days in 2009 and 64 of its members were arrested. But later that year, it withdrew from the Korean Confederation of Trade Unions, the most hard-line labor group in the nation. No strikes have taken place since.
The number of Ssangyong cars sold in the first quarter of this year and the fourth quarter of last year rose by 9.7 percent and 9.5 percent from a year earlier, respectively. It sold 109,140 vehicles in Korea last year -- a 15-year high.
Renault Samsung and its union should have concluded their 2018 wage negotiations last year. Even if they reach an agreement this month, they will have to start negotiations next month over 2019 wages and working conditions. That means Renault Samsung will have to grapple with labor negotiations all year long.
The Korean automobile industry suffers from high labor costs and low efficiency. If industrywide strikes occur, output will shrink further and this will imperil the survival of the industry. In the first quarter of this year, Korea produced 954,908 vehicles, the smallest number since the first quarter of 2009.
If the trend continues, before long annual production could fall short of 4 million vehicles and the industry will face a serious crisis. That figure is regarded as the minimum output needed to sustain the car industry ecosystem.
Particularly worrisome is that strikes are abused as a form of political pressure. The major goal of the threatened strike at Hyundai Motor is to block amendments to Korea’s labor law. The proposed bill would provide for flexibility in setting working hours, revamp the way the minimum wage is calculated, and allow employers to hire alternative workers when union members are on strike. These are necessary steps to sustain and foster business activity. A total walkout to protest the bill is hardly justifiable from the standpoint of the company.
Foreign carmakers have been accelerating efforts to restructure their global organizations, innovate technologies, and enhance productivity to adapt to their fast-changing market. Carmakers have joined hands with semiconductor companies to develop self-driving vehicles. Once Korean automakers fall behind, they will find it almost impossible to catch up. If their unions drag them down, their survival is not guaranteed. If the companies cannot survive, neither can the unions.