As its labor union is expected to gain greater leverage from the potential passage of a controversial pro-labor amendment in Korea.
Last week, Hyundai Motor and Kia cleared a major trade uncertainty after Korea and the U.S. reached an agreement that reduced the auto tariff from 25 percent to 15 percent, putting the Korean carmakers on equal footing with their Japanese and European rivals in the world’s largest economy.
However, they now face another major hurdle, as the ruling party is pushing to pass a bill to revise the Trade Union and Labor Relations Adjustment Act — better known as the “yellow envelope bill” — which would expand collective labor rights.
This would widen the scope of strikes, giving the carmakers’ union members a stronger legal basis to walk out in protest against the relocation of production from Korea to countries such as the U.S.
This may come as a major risk for Hyundai Motor Group at a time when it has to increase its production in the U.S. due to lingering tariff burdens. There is a possibility that the company will decide to reduce production volume in Korea to maximize its manufacturing capacity in the U.S.
Given the hardline nature of the carmakers’ union, its workers are widely expected to utilize the labor act amendment by protesting the management’s move to expand production lineups at its U.S. assembly lines.
Hyundai Motor Group Executive Chair Chung Euisun delivers a speech celebrating the opening of Hyundai Motor Group Metaplant America in Ellabell, Ga., March 26. Courtesy of Hyundai Motor
Hyundai Motor Group Executive Chair Chung Euisun delivers a speech celebrating the opening of Hyundai Motor Group Metaplant America in Ellabell, Ga., March 26. Courtesy of Hyundai Motor
Hyundai Motor Group has plans to produce more of its hybrid SUVs at its U.S. factories, such as Hyundai Motor Group Metaplant America (HMGMA) in Georgia, to meet growing demand for the vehicles.
According to data from Hyundai Motor and Kia, their combined hybrid sales in the U.S. surged by 45.3 percent to more than 136,100 in the first half of the year.
However, the carmakers’ plan to expand hybrid production for its new line may draw strong opposition from its union members if the expanded U.S. production comes at the cost of reduced operations at Korean factories.
“We will increase production volume in the U.S. and flexibly deal with the market,” Koo Za-yong, executive vice president at Hyundai Motor, told investors during a recent conference call.
Industry officials argued that the carmakers’ union will fight back against plans for production relocation to the U.S.
“Even if Hyundai Motor and Kia were hit hard by tariff shock, as evidenced by their drastic earnings fall in the second quarter, their union members will still demand massive pay hikes in their ongoing wage negotiations, which is seen as too excessive,” an official from the industry said.
“The union members will likely use the labor act amendment to maintain their production volume here on fears of a possible wage fall.”
