Hyundai Motor,Union Tentatively Agree Wage Hike;Resume Operating

SEOUL August 5, 2003; Dow Jones reported that Hyundai Motor Co. and union leaders said Wednesday they have tentatively agreed on wage hike rate and other union demands, ending a seven-week strike that cost the car maker more than 1.3 trillion won ($1=KRW1, 187.9) in production losses.

"Workers are back to work now and we today resume operations at a normal daily 20-hour working schedule," said Jake Jang, a Hyundai Motor spokesman.

At their 27th meeting Tuesday, the country's largest car maker and its union reached an agreement late in the day, which includes a 8.6% wage increase for this year and an incentive-based bonus worth more than 300% of basic monthly salary. They also agreed to begin a five-day work week Sept. 1 with compensation for wage losses stemming from the shorter working hours.

Hyundai Motor's 39,000 unionized workers will vote Friday on whether to accept the tentative agreement or not, said Kyu-ho Jang, a union official. Hyundai Motors has a total of 50,000 employees.

Hyundai Motor and industry watchers expect the unionized workers to accept the tentative agreement.

Under the agreement, Hyundai Motor will allow the union to participate in some managerial decision-making, particularly on issues related to job security.

Hyundai Motor will set up a labor-management committee to discuss key issues. It will also tell the union when board meetings are to be held and the decisions made at the meetings.

The automaker agreed not to lay off workers or implement a voluntary retirement program due to an economic downturn or the launch of overseas plants without the union's consent.

Hyundai Motor also said it will maintain its domestic production capacity at this year's level even after the establishment of overseas plants. Hyundai Motor's production capacity for this year is 1.95 million units.

The automaker plans to open its first U.S. automobile plant in Montgomery, Alabama in 2005 with an annual capacity of 300,000 units. The automaker has also said it wants to establish production facilities in Europe following the launch of the U.S. plant.

The agreement came after the South Korean government threatened to step in to end the strike as the impact of the labor action spread to the overall economy.

Industry watchers believe the concessions Hyundai Motor made to end the strike sets a bad precedent for management-labor relations at other work places.

"It seems Hyundai Motor realized it was wiser to settle the dispute as soon as possible and to bring the workers back to work," said Song Sang-hun, an analyst at Hyundai Securities.

The agreed wage increase rate isn't big enough to immediately affect the company's financial condition given its abundant cash reserves and healthy business fundamentals, said analysts.

"However, what is concerning is that the sharp wage increase - which is far higher than global competitors - is likely to eventually hurt Hyundai Motor's competitiveness. And the difficulties in reducing or cutting the work force could weaken the company's ability to cope with any business slump in the future," said Song.