Hyundai Motor 's union has threatened the automaker with legal action if it signs a contract to invest in a local car manufacturing joint venture proposed by a city's municipal government.
According to the Yonhap news agency, the automaker had planned to sign an agreement with the Gwangju city government on Tuesday to become the second largest shareholder of the car production JV, which would assemble vehicles under an original equipment manufacturing (OEM) contract.
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But the plan was delayed to next month as the mayor of the city government was replaced in the 13 June local elections, a company spokesman told Yonhap.
The union said in a statement cited by the news agency Hyundai's 51,000-member union would take the company's plan to invest about KRW53bn (US$48m) in the vehicle production JV to court for breach of trust and violation of an existing collective agreement.
The spokesman said the Gwangju government had been wanting to build a KRW700bn won car manufacturing JV with capital of KRW280bn and a loan of KRW420bn and aimed to complete the plant by 2020.
Hyundai would provide KRW53bn with the remaining KRW227bn to come from the Gwangju government, making it the biggest shareholder.
Hyundai said it planned to have the plant produce one-litre mini cars through OEM contracts. Hyundai does not produce mini cars domestically though it makes similarly sized models, such as the i10, in overseas plants.
Yonhap said the JV was aimed at generating jobs in Gwangju, 330km southwest of Seoul, and helping support the local economy.
The Gwangju government proposed tax benefits to investors such as a 75% reduction in acquisition taxes and another 75% cut in income taxes for the first five years, Hyundai said.
The Gwangju government said it planned to pay employees at the plant an annual salary in the mid-KRW30m range, far lower than the average of KRW90m for workers at Hyundai plants. Hyundai expected to produce vehicles at low cost in the new OEM plant.
As the vehicles produced at Hyundai's plants cannot be transferred for production to other plants without approval from the union, only new models can be built at the OEM plant, Hyundai said.
Hyundai's union said it was against the move, stressing the carmaker has extra production capacity [at existing plants in South Korea].
The combined output capacity of Hyundai and affiliate Kia Motors is 9.68m vehicles while global sales reached 7.35m last year.
"The company has ample leeway to assemble vehicles in its existing plants and there is no need to look elsewhere," the union told Yonhap.
