Auto companies face union dispute risks

Korea’s monthly export value continues to register negative year-on-year growth for 11 consecutive months from October last year to August this year. Major export business sectors are showing slow performance.

The auto industry was the lifesaver that drove Korea’s growth against this background. Auto exports in August alone recorded 5.29 billion dollars, 28.7% higher than August last year and reflecting ongoing growth for 14 months.

Auto manufacturers’ performance is strong as well. Second quarter sales for Hyundai Motor were 42.2487 trillion won, 17.4% higher than last year's. Operating income stood at 4.2379 trillion won, 42.2% higher than last year. Kia’s growth rate is higher, with sales and operating income at 26.2442 trillion won and 3.403 trillion won, respectively, up 20.0% and 52.3% from the same period last year. Both companies achieved the highest quarterly performance to date.

Until the first half of last year, the dominating view was that “Korea’s exports would have suffered terribly without semiconductors.” This time, the same can be said for auto manufacturers.

Such strong performance, however, is at risk of being stopped. The brakes were put on not by global competitors or the external business environment but by internal labor unions.

Hyundai and Kia labor unions achieved wage and group negotiations for four and two consecutive years, respectively, without any disputes. This year, however, the Hyundai Motor branch (Hyundai Motor union) and the Kia Motor branch (Kia Motor union) of the Korea Metal Workers' Union under the Korean Confederation of Trade Unions (KCTU) went on partial strikes as part of the general strike of the Korean Confederation of Trade Unions in July and May.

The unions of both companies are asking to postpone the ‘retirement age to 64’ as their primary agenda, extending the current age of 60 by another four years, which is a difficult ask for the company to accept. Unreasonable extension of the retirement age may hinder new hiring. When Hyundai Motor started hiring new production workers for the first time in 10 years in March this year, tens of thousands of applicants signed up for 700 positions. The same was true for Kia, which hired 100 production workers last year.

Of course, there is a chance that labor unions may conclude successful negotiations without any disputes. There would be no reason for labor unions to put a damper on the recent strong performance.