Hyundai’s car production could grind to a halt after its 45,000 union workers in South Korea voted to strike over unmet demands.
A year after Hyundai's costliest ever work stoppage halted production of more than 82,000 cars worth 1.7tn won (£984m), the world's No. 5 automaker including its Kia Motors Corp unit, is bracing for another blow with the union promising an "intensive strike" as early as next week.
The union members are responding to a failure by the company to meet demands including a one-off payment of $2.45bn (£1.59bn) from the company's record 2012 profit and gold medals for long-serving employees.
Although analysts say another prolonged strike like last year's looks unlikely, the recurring strife is taking a toll on the company's output, reputation and share price.
The union has staged strikes in all but four years since it was created in 1987, making South Korea's auto industry far more prone to industrial action than its big global rivals, the USA States, Japan and Germany.
About 1,000 Hyundai workers rallied in front of the automaker's Seoul headquarters on today and police blockaded the entrance.
While the US "Motor City" of Detroit recently filed for bankruptcy protection, Hyundai's production hub of Ulsan boasts the country's highest per capita income, thanks largely to the auto union's successful wage negotiations.
"We don't like to strike. But the company has accepted part of our demand only after we staged strikes," union spokesman Kwon Oh-il told Reuters.
Hyundai Motor shares have shed $1.1bn in market value since its wage talks collapsed on 6 August.
The company offered to resume wage talks this Friday, but union chief Moon Yong-moon said he would return to the table only if the company offered a better deal.
The union's requests include performance pay equivalent to eight times the monthly base salary, and the one-off payment equivalent to 30 per cent of the company's $8.17bn in 2012 profit.
The union is also seeking a 56.25 gram gold medal – worth about $2,400 at today's prices – and a bonus of two month’s salary for those with at least 40 years of continuous service, as well as 10m won for each worker whose children opt not to attend college. The company is already paying college tuition fees for workers' children.
With an annual capacity of 1.5 million vehicles, Hyundai's Ulsan plant, 236 miles southeast of Seoul, has driven the company's breakneck growth in the past decade from a seller of cheap-and-boring cars to a global powerhouse brand making stylish-but-affordable vehicles.
As it grew, Hyundai opted for labour peace over the risk of disrupting manufacturing, and its union became more powerful, according to labour experts and a Hyundai executive.
"I have to admit it is of our own making. It's been our own choice," a Hyundai executive who is privy to details about the labour negotiations told Reuters. "We were a latecomer to the market and thus made it our top priority to become a global top-five manufacturer. So we had to prioritise production over labour issues.”
The hourly labour cost for Hyundai's domestic factories was 24,778 won per worker in 2012, triple the 7,711 won for its China plant and above the 21,422 won average for its US plant, according to Daiwa Securities analystChung Sung-yop.
Since 2002, Hyundai workers' average annual salary has more than doubled to 94 million won, according to the company's regulatory filings.
Hyundai hopes that its growing overseas production, which has already outpaced domestic output, will help it reduce its reliance on the unionised Ulsan factory. Hyundai now assembles 43 per cent of its total global output in South Korea, according to company data. Its US plant in Alabama is non-union.
"Hyundai sacrificed principles in labour relations to meet its production target. They simply bought industrial peace," said Cho Seong-jae, a senior researcher at the Korea Labor Institute in Seoul.