Hyundai agreed to a wage increase after union pressure

Hyundai Motor has reached a final agreement with the labor union to end a workers protests that have cost South Korea’s largest automaker $921 million in lost production.

The Hyundai union voted late on Monday night to approve Friday’s preliminary agreement that included a wage increase of 5.14% and a bonus payment to each employee of 500% of the basic monthly wage, plus $8,400 in cash and incentives.

The company’s 46,000 employees returned to work on Friday after being on partial strikes since August 20 following the collapse of annual wage negotiations begun in late May.
The industrial action cost Hyundai production losses of 50,000 vehicles worth about $921 million, but the automaker expects to be able to catch up by increasing production over the rest of 2013.

The agreement raises the question of a deal between Hyundai affiliate Kia Motors and its own union, which is threatening to stage partial strikes for three days this week. Kia’s unionized workers have stopped production six times since August 21, resulting in production losses of about 19,400 vehicles worth about $314 million.

Labor unions had been gradually losing their power in corporate Korea since former president Lee Myung-bak, who stepped down in February, tackled illegal union activities. In the first half of this year there were 17 strikes, half the number seen in the same period in 2012.

“The labour disputes are likely to be repeated next year and it will be really difficult for Hyundai to end the cycle, which will be a big long-term challenge for the company,” said for Financial Times, Kim Ki-chan, professor of business administration at the Catholic University of Korea. “The deal looks like a victory for the union in the short run but the walkouts will be a losing game for the workers in the long run because Hyundai will have no choice but to keep expanding overseas production.”

Labor relations at home have been a longstanding problem for both car-makers. After an unusual run of three consecutive strike-free years, last year saw the most expensive strikes in their history.

Hyundai shares were up 0.8% yesterday while had struggled to gather more than 6% raise in shares since last year.