A strike just ended at Hyundai Motor is likely to hit the company’s short-term profitability but not its aggressive growth targets for the year, and some analysts have told the Wall Street Journal (WSJ) that management may have greater negotiating power in years to come.
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The WSJ said Hyundai and its workers tentatively agreed a new contract early on Thursday after the month-long strike cut output at Hyundai’s Korean factories in half, amounting to about $US1.2bn in production value, and weakened the launch of a new version of its most popular export, the Elantra sedan, by leaving many dealers unable to get the car.
The report said Hyundai routinely plans for production troubles at this time of year and tries to boost dealer inventories ahead of the seasonal strikes – the Elantra disruption hurt Hyundai, but there is no reliable way to gauge the strike’s ultimate impact until company executives decide whether to change their targets.
Analysts told the paper they expect Hyundai to meet its 2006 volume target – it is aiming to build 2.69m vehicles this year, a 15% increase from 2005. Hyundai expects to produce 1.77m of those vehicles in Korea, a 4% increase over its domestic production last year.
Analysts also told the WSJ a consolidation of unions is growing likelier – that would give workers more muscle in many respects but ultimately could end the annual ritual of partial strikes and acrimonious negotiations that have crippled Hyundai every summer since 1987.
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By GlobalDataThe WSH suggested such a consolidation raises the prospect that Hyundai may be able to negotiate multi-year contracts, as is done in the US, where the United Auto Workers negotiate with one big car maker and then take that basic agreement framework to others.
The WSJ suggested that a consolidation of unions likely would force both workers and companies to undergo more sophisticated bargaining, since workers at a single plant who voted to strike would be joined by fellow unionists at others.
“In the next three or four years, we are at a turning point,” Park Young Ho, automobile industry analyst at Daewoo Securities in Seoul, told the Wall Street Journal.
“The unions are aggressive, but Hyundai Motor will eventually be in a stronger position. Production overseas is increasing … and the domestic workers’ power will decrease.”
A spokesman for the union representing Hyundai Motor’s workers, Song Hee-Seok, told the WSJ it doesn’t view any threat to its influence from the growth of overseas production. He said the union believes in yearly wage negotiations because of the volatility of the Korean economy.
