Hyundai Union ‘Sick’ of Strikes May Curb Disputes on New Leader

Oct. 7 (Bloomberg) -- Hyundai Motor Co.’s Korean employees return to work today after electing a union leader committed to curbing strikes have that cost the automaker $9.9 billion in lost production since 1987.

Lee Kyung Hoon, defeated in six previous biennial polls, was elected head of Korea’s largest union before the automaker’s five-day thanksgiving holidays on a platform pledging to shun the political agenda of the nation’s umbrella labor group. That may herald a reduction in strikes at Hyundai after walkouts in 21 of the last 22 years on issues ranging from pay and bonuses to U.S. beef imports and free-trade talks.

“Workers used to going on strike almost every time a new model came out, and that really hurt Hyundai,” said Kwak Tai Ho, who helps manage $252 million at Kyobo AXA Investment Managers Co. in Seoul as an analyst. “This year’s election is significant and good news for the company.”

South Korea’s biggest automaker boosted sales 61 percent in September compared with a year earlier when workers staged sporadic strikes over four days. Strikes have cost Hyundai production of 1.1 million vehicles since the union’s foundation in 1987, according to company estimates.

“Labor has been the Achilles’ heel for Hyundai,” said Sohn Myung Woo, a Seoul-based analyst at Woori Investment & Securities Co. said. “The first moderate union leadership in 15 years will surely be a tailwind in Hyundai’s sail.”

Sick of Strikes

Lee, 49, joined Hyundai in 1986 at a factory in Ulsan, a city 414 kilometers (257 miles) south of Seoul, and home to Hyundai’s biggest domestic plant. Calls to the union’s headquarters last week and this week went unanswered.

“Union members are sick of all these strikes,” Lee said on Sept. 28, according to a JoongAng Ilbo newspaper report. “We shouldn’t fight or go on strike just for the sake of it.”

The 45,000-member union has gone on strike every year since its establishment in 1987, except for 1994. There haven’t been any strikes this year, partly because the previous union leader Youn Hai Mo stepped down before the end of his tenure, causing a delay in annual pay talks. Lee won a run-off election with 53 percent support on Sept. 25 after an initial vote with four candidates failed to produce a winner with an absolute majority.

Hyundai has welcomed the new leadership.

“We believe we can talk about a new hope together, overcoming confrontation and conflict,” Vice President Kang Ho Don said in a Sept. 29 letter to employees. “Both the company and the union should work together to create a new labor- management culture.” Hyundai circulated the letter to reporters.

The automaker have more than doubled this year in Seoul trading, compared with the key Kospi index’s 42 percent gain. It fell 5.3 percent today to close at 96,600 won.

Less Militant

Korean workers have become less militant nationwide after winning higher wages and because of rising unemployment and steps by employers to shift production overseas. The number of South Korean workdays lost on labor disputes tumbled 58 percent this year through July 17, according to the Ministry of Labor.

Worldwide, Hyundai sold 307,181 vehicles last month, compared with 190,480 a year earlier. The automaker bucked a U.S. slump in September, boosting sales 27 percent compared with a 13 percent decline for Toyota Motor Corp. and a 20 percent drop for Honda Motor Co.

The automaker will likely report a third-quarter profit of 465.2 billion won, according to the median of 19 analyst estimates complied by Bloomberg. A year earlier, profit fell 38 percent to 264.8 billion won.

Overseas Plants

Hyundai has reduced its reliance on domestic production by opening plants in Turkey, India, China and the U.S. in recent years. Affiliate Kia Motors Corp. has factories in Slovakia and China and is building one in the U.S.

The election of Lee and Hyundai’s new union leadership may also boost production at home.

“It could reduce potential production disruptions and promote more amicable labor-management relations,” Zayong Koo, an analyst at Nomura Holdings Inc. wrote in a Sept. 28 note. Lee’s win “signifies a change within the union toward stability and employee welfare from politically driven strikes.”