Friday, August 29, 2014

Korea Commentary: Car Industry Strikes 2014

Labor issues abound in Korea.  None more public than those in the car industry.  As for my thoughts on when this year's Hyundai and Kia Motors’ strike will be resolved…. it’s hard to make a prediction.

My concern is that the Strike vote was late this year, in late August vs. July, and Chuseok is very early this year.  Many years, Union and Management conclude negotiations before the Chuseok Fall Harvest holiday, which begins next week on Sept. 6.  

Nearly 70 percent of the 47,000 + workers in the Hyundai union voted to strike, joining Kia’s workforce of 30,000.

The Union’s primary demand is that bonuses and other compensations now be included in determining workers’ base pay. Currently this base pay is an hourly compensation. In turn, this wage plus bonus base would be used to calculate allowances for overtime and holiday shift pay and other benefits, such as vacation pay and pensions. The inclusion of bonuses would raise workers’ overall income by an average of 10%.

The Company’s position has been that the ordinary wage/bonus demand should not be part of the current contract talks until there is a final court decision ruling on the issue. The country’s Supreme Court ruled in December 2013 that periodic bonuses and other compensation must be included in workers’ base pay. The court deferred   to companies and their unions to carry out specifics of the ruling.  Acting in response to the ruling, Hyundai and Kia and the Union entered into its own legal battle over the inclusion.  Results of this legal review by the Courts are still pending.

Other key contract issues include an extension of the mandatory retirement age from the current 58 to 60. Frankly, this is an issue with older workers throughout South Korea.

Meanwhile, Renault Samsung Motors Co., the local unit of French automaker Renault S.A reached a tentative agreement on this year's pay increase, pending a local court's decision on a sticky labor-management issue on ordinary wages.

In addition, carmakers, such as GM Korea and Ssangyong Motor, decided to include bonuses and other fixed benefits in their ordinary base pay.

My hope is Hyundai and Kia Unions and Management either follow a path similar to Renault Samsung and defer to the courts ruling on the issue of determining the base for ordinary wages or come to a mutual agreement while pushing the vote to after the holiday.

Best case scenario... labor unions and management reach an agreement by as late as the middle of next week.  Meanwhile, normal tactics are in play.  Shift walkouts are underway as well as planning for a rally planned for outside the Hyundai and Kia Motors HQ.

More to come... as it unfolds.



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