2 Hyundai Companies Deal Far Differently With Labor

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July 27, 2006
2 Hyundai Companies Deal Far Differently With Labor
By CHOE SANG-HUN, International Herald Tribune
SEOUL, South Korea, July 26 — For years, the Hyundai Motor Company and Hyundai Heavy Industries have been celebrated as crown jewels of South Korean manufacturing. They were founded in the early 1970’s by Chung Ju-yung, a rice farmer’s son who dreamed of exporting ships and cars around the world when the country had no dry dock and its streets teemed with rickshaws.

Hyundai Motor, now run by a son of Mr. Chung, who died in 2001, has since grown to become the nation’s largest carmaker, and Hyundai Heavy Industries, controlled by another son, has become the world’s largest shipyard. But over the years, the two companies have sharply diverged over their relationship with labor unions.

On Wednesday, managers and union leaders of Hyundai Heavy Industries shook hands over a wage agreement, making this the 12th year in a row that there has not been a strike at the company. At its shipyard in Ulsan, a port 250 miles southeast of Seoul, workers were busy piecing together vessels larger than two football fields.

A half-hour’s drive away, at the sprawling Hyundai Motor factory, labor and management also reached an agreement Wednesday, with the details almost identical to those at the Hyundai shipyard.

But the tentative Hyundai Motor agreement, calling for a 5.1 percent pay increase, came only after a partial strike had crippled the company’s assembly lines for a month, reducing its exports to a trickle and inflicting production losses worth more than $1.3 billion — the worst damage from a labor action the company has suffered in recent years. And it has suffered plenty: 2006 is the 12th year in a row its workers have walked off the job or laid down their tools for extended periods.

A Hyundai Motor spokesman, Jake Jang, remarked with a touch of envy, “The labor-management relationship they have at Hyundai Heavy is ideal.”

What happened at the Hyundai Motor Company illustrates how South Korea is struggling to overcome labor unrest, commonly cited as a weak spot for the economy and particularly the auto industry. (Workers at Hyundai Motor’s affiliate, Kia Motors, plan to resume partial strikes on Thursday after wage talks failed.)

The Hyundai shipyard finds the carmaker’s plight instructive. “By watching the situation at Hyundai Motor, we learn a lesson on how not to do it,” said Lee Kyun-jae, who is in charge of labor relations there.

This week, South Korea’s labor minister, Lee Sang-soo, told reporters: “In the past, our unions tended to believe that they should strike as a routine and that they could become powerful through strikes.” He added, “This is a culture we should overcome.”

Mr. Lee made the comment several days after 1,800 construction workers ended an eight-day occupation of the headquarters of Posco, the nation’s largest steel mill, demanding higher wages and better working conditions. Dozens of people were injured in clashes with the police.

At Hyundai Motor, the work slowdown since its unionized workers went on the partial strike June 26 has cost 92,000 cars in lost production. Recently, the company has not been able to export, not having enough cars in stock.

For years, Korean society has tolerated labor unrest. Striking workers have been seen as democracy activists, while industrialists were often embroiled in corruption scandals.

South Korean companies, including Hyundai Motor, have compensated striking workers for lost wages as a way to end walkouts. Companies pay the wages of full-time union leaders, a practice the government will try to eliminate next year, and they routinely agree to end lawsuits against organizers of illegal strikes as part of deals to return to work.

The authorities are said to be reluctant to use the police to break illegal strikes, as the unions have grown into an influential political force.

Hyundai Motor’s dominant market position at home, which enabled management and labor to engage in prolonged confrontations, also contributed to the situation at the auto company, said Lee Chang-won, an analyst at the Korea Labor Institute.

Workers there have received 6 percent to 9 percent wage increases each year, double or triple inflation. But a union spokesman, Song Hee-seok, said the workers’ relatively high wages were based on overtime and night shifts.

While labor relations at Hyundai Heavy Industries are calm these days, the shipyard was not so peaceful when Mr. Chung opened it in 1972. He had little technology, but ample support from the military government at the time, and he ran the business with a style that critics said bordered on dictatorship.

Workers toiled long hours at low wages. Ambulances regularly wailed out of the shipyard as workers fell from scaffolds or were crushed under heavy tools. Mr. Chung once said, “I can allow labor unions in my company, but only over my dead body.”

Long-festering complaints exploded in 1987 with the onset of political democratization. Workers formed their first independent union and went on strike.

“During wage negotiations in the old days,” said Kim Sung-ho, the union chief at Hyundai Heavy Industries, “people on one side practically flew over the table and physically entangled with the other side. Slogans like ‘liberation of workers’ and ‘down with capital’ were everywhere.”

Hyundai Heavy Industries’ management quickly realized that it had to share some of the wealth, offering large wage increases. In 1991, it supplied workers with apartments at half the market price and ensured that none of its married workers were without their own houses. It subsidized kindergartens and recreational programs.

Chung Mong-joon, the largest shareholder in Hyundai Heavy Industries, has been elected to Parliament five consecutive times, running in a district where shipyard workers live.

“Workers began realizing that strikes were not the only option we had,” Mr. Kim said. “We decided to become more practical. We think of competing in a global market. Labor peace increases competitiveness. With it comes more orders, more job security and better wages.”