Hyundai Motor shares tumbled to a three-week low on Tuesday over investor worries that a prolonged labour dispute may cause major output disruption at South Korea’s largest automaker.
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The dispute, which highlights how organised labour has long been a disruptive force in Asia’s fourth-largest economy, came the day Mahindra & Mahindra signed a final agreement to buy South Korea’s smallest automaker, SsangYong Motor, for US$464m.
Ssangyong Motor was itself hit by almost two months of labour strikes last year, crippling its production, Reuters noted.
Labour unrest remains a concern for South Korea’s auto industry, which typically face strike action every summer.
“It is possible that Mahindra might have to give a wage hike, or help workers retain jobs, so that might stretch P&L to some extent,” said Umesh Karne, research analyst at Brics Securities in Mumbai, referring to Mahindra & Mahindra’s balance sheet.
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By GlobalData“Labour unrest has been a feature of the South Korean market for the past one year.”
Hyundai had this year avoided an annual strike by regular workers for the second consecutive year but temporary workers went on strike this month, demanding Hyundai convert their positions into permanent roles.
The strike has also raised concerns that prolonged action may weaken profit growth at the world’s fifth largest automaker.
“We have expected Hyundai Motor to log its best results for the fourth quarter. But should the strike be prolonged, that may not happen,” Lee Sang-hyun, an analyst at NH Investment & Securities, told the news agency.
“The shares are also coming under pressure after its sharp rise this year.”
Shares in Hyundai, which have jumped 49% this year and easily surpassed the wider market’s 16% gain, fell 4.2% on Tuesday to a three-week low.
Shares in its affiliate Kia Motors , which have more than doubled this year, also slid 3 percent.
A Hyundai official said on Tuesday that it has suffered more than 100 billion won ($88.8 million) in lost production since Nov. 15 due to industrial action by temporary workers at
its lines in the southeastern city of Ulsan.
An umbrella union group, of which Hyundai’s labour union
is a key member, voted on Monday to launch a full strike early
next month, if Hyundai Motor’s management refuses to hold
talks with temporary workers by the end of this month.
Hyundai has said it would not go into talks over an
illegal strike.
Some analysts said the impact would be limited as regular
workers were unlikely to participate in a strike.
“The strike will not have a major impact on Hyundai’s
business, because it is waged by temporary workers,” Ahn
Young-hoe,” a fund manager at KTB Asset Management.
“The strike has affected share prices today, but the
shares have also been affected by investors’ portfolio
adjustments and rising market concerns over China’s possible
monetary tightening, which would dent sales of automakers.”
