Labor unions press on Hyundai and Kia, voted for strike

Unions at Hyundai Motor and affiliate Kia Motors have voted in favor of strike action, raising the possibility of continued disruption a year after the South Korean labor walkout which was extremely costly for the car-maker.

The workers at the companies’ South Korean factories are among the best paid in the global automotive industry, thanks in part to strong unions at both car-makers, which have been sister companies since Hyundai’s takeover of Kia in 1998.

As the unions proposed wage increase of a rate well above inflation plus other benefits, the two sides didnt come to agreement. Now the workers and companies have entered into six days meditation period.

If it came to strike action by the 45,000-strong union, it could begin next Tuesday, although a Kia union spokesman said it was unlikely to start so soon.

“We regret that the union has begun preparations to strike despite the company’s proposal to outline its offers in the next round of talks,” Hyundai said. “There are also many aspects of the union’s demands that are hard to accept from the company’s point of view.” the company official stated.

A Kia spokesman said walkouts had been “commonplace in our recent history”, and were therefore expected by management.

The prospect of renewed labor disruption underscores an issue that is viewed by many investors as a major drawback of investing in the two South Korean car-makers, after a strike last year resulted in $1 billion of lost production. This year, an eight-week partial work stoppage as the union refused to do weekend shifts had cost Hyundai more than $900m in production losses.

However, some analysts think fears were overdone, explaining that the car-makers had made up the lost production from last year’s strike with extra labor shifts in the fourth quarter.

Hyundai Motor Co., advanced more than 2% on yesterdays trading session. Kia Motors also jumped by 1.3%.