Hyundai Workers Extend Strike After Land Deal
Shareholders are not the only ones displeased with the US$10 billion land deal that Hyundai has recently successfully bid for; the South Korean automaker’s 40,000 labour union workers have extended the partial strike over wage disagreements after news of the exorbitant bid hit the headlines.
After the deal was announced by the seller, debt-ridden KEPCO, workers at Hyundai’s main factory in Ulsan abandoned their posts for two hours on Tuesday and Wednesday, and extended the period to four hours from Thursday; the workers voted on Friday to extend the strike until this week. The strike is the second in a month amidst hindered wage negotiations: the union wants the workers’ regular bonuses to be considered as part of their basic pay, so that a higher base amount will be used when calculating overtime, holiday shifts and pensions. Hyundai has refused to concede to the request, saying that it would increase its salary cost by 10%; the chaebol’s domestic employees, not including executives, earn an average of US$90,419 annually.
After several rounds of unproductive wrangling with the Hyundai management, unions at Hyundai and its sister company, Kia, had staged partial strikes for two days in late August. According to Yonhap news agency, which cited a Hyundai official, the strikes and the workers’ refusal to work overtime had resulted in the loss of US$673 million in sales and the preclusion of some 32,000 cars from being produced. Hyundai, with its affiliate Kia, is the fifth largest carmaker in the world, and has been riddled with strikes in all but four of the union’s 27 years in existence.
Coupled with the strong South Korean Won, Hyundai has been working to accelerate overseas production, with its new factories in China and Mexico expected to start churning out cars by 2016. Last year, the automaker only made 38% of its cars in South Korea, down from 80% in 2004. Then came the news that Hyundai had bid for a plot of land in upmarket Gangnam, for a price that was three times its assessed value. In a statement, the union said, “The management has kept saying they don’t have enough money while opposing the wage reform…But look how much money they have for this property deal!”
The land deal is beginning to look more like the fulfillment of one man’s fantasy, namely, CEO Chung Mong-koo, as it has been revealed that the conglomerate’s Boards were kept in the dark about the bid price. While the Boards of all three firms – Hyundai Motor, Kia Motors and Hyundai Mobis – discussed and approved the bidding for the plot to house a new headquarters, the bid price was deemed confidential and the Board members were not privy to it. One unidentified director was reported to have said, “The price was top secret, so it was not something we discussed at the meeting…The intangible benefits go beyond the appraisal price of the land.” Board disapproval is uncommon at chaebol’s.
Chung Mong-koo simply said that the decision was made after considering “the big picture of the company’s growth over the next 100 years.” With no concrete explanation to show shareholder benefits or value-creation, Hyundai Motor’s share price plummeted to its lowest in 17 months, closing at US$187 on Friday, and losing some 15% of the company value since the deal was announced.