Hyundai Motor faces strike threat

Hyundai Motor faces strike threat

C.W. Lim Agence France-Presse Seoul

Workers at South Korea's top carmaker Hyundai Motor Co. on Monday threatened to strike unless the company increases their wages by 12 percent.

The threat has added to concerns Hyundai Motor's profitability could be eroded by the won's rise against the U.S. dollar and renewed competition from Daewoo Motor Co. now it is controlled by U.S. giant General Motors Corp.

Hyundai Motor's union said its 38,000 members would stop work from Tuesday if labor-management talks end in failure.

The company is a top sponsor of the World Cup football in South Korea and any action would be a blow to government hopes of a strike-free tournament to boost the country's image.

"We are going to start an all out strike from tomorrow if management does not accept our demands in a new round of negotiations scheduled for this afternoon," union spokesman Kim Dong-Kwan said.

"We are going to strike indefinitely until our demands are met," he added.

Hyundai Motor workers have been staging four-hour strikes each day since last Friday. But the company has rejected demands for a 12 percent wage increase and that 30 percent of yearly net profits be handed out as bonuses.

The company and its affiliate Kia Motors Co. control more than 70 percent of South Korea's auto market. Hyundai Motor saw its net profit and sales hit record highs in the first quarter this year thanks to a domestic sales boom.

It said a wave of strikes this year had already cost 306 billion won (US$247 million). Labor action since May 10 has cost the company about 110 billion won, it said.

Kia Motor's union is also staging industrial action to back its demands for a 12.5 percent wage hike and bigger allowances.

"If the union's threat to stage a general strike materializes tomorrow, the company could suffer a severe setback," said Korea Investment Trust Securities analyst Song Yung-Sun.

Domestic demand has outstripped production this year as consumers snap up cars before the end of August, when cuts in special consumption taxes come to an end.

"If the labor union keeps demanding that the company pay 30 percent of net profits as bonuses every year, that would cut the company's profitability and negatively affect the stock price," Song said.

He said Hyundai Motor could post a net profit of 1.5 trillion won this year, which means it could have to pay 500 billion won in bonuses.

The Korean won has strengthened from more than 1,250 to the dollar to 1,230 in a few weeks. And analysts said Hyundai's sales would fall 200 billion won for every 100 won rise in the value of the Korean currency against the dollar.

Hyundai Motor has yet to pass on the rise in costs resulting from the won's strength. The company is under pressure to raise export prices to maintain profitability.

Hyundai officials are also concerned about a South Korean government plan to tighten rules on diesel engine exhaust gas emissions from July. The move could affect sales of Hyundai's best-selling Santa Fe and Trajet XG models.

Hyundai hopes to divert the Santa Fes to the U.S. market where consumers have to wait for three months to get the sports utility vehicle with gasoline engines.