S.Korean summer strikes widen at Hyundai Motor

S.Korean summer strikes widen at Hyundai Motor

Jean Yoon
Reuters
Seoul

About 40,000 unionized workers at South Korea's top car maker,
Hyundai Motor Co, began a two-day strike on Tuesday to demand
higher wages, fanning investor fears over another summer of labor
unrest.

South Korea traditionally faces a seasonal rise in union
action every summer, but labor strife this year poses a big
headache for a government struggling to boost sluggish domestic
demand and business spending.

If successful in hiking wages, the strikes also threaten to
reduce Hyundai's competitiveness against U.S. and Japanese car
makers, whose wages are flat or growing slowly, and strengthen
its push to move car plants to Europe and the United States.

Hyundai's union is the country's largest and most powerful
member of the umbrella group Korean Confederation of Trade
Unions, which is threatening to unleash a summer of labor
discontent, demanding higher wages and better working conditions.

A combined 110,000 workers at Hyundai Motor and smaller auto
makers, textile companies, department stores and other workplaces
are due to lay down tools on Tuesday, according to the union
group, which has a total of 600,000 members.

"The strike started at 8 a.m. (2300 GMT on Monday) as
scheduled," a Hyundai union spokesman said. "All union members
are participating."

"The operation has been halted due to the strike," said a
Hyundai spokesman. Hyundai has a total workforce of 50,000.

The strike comes after wage negotiations between Hyundai's
management and its union unraveled. The union, which is seeking a
10.48 percent increase in wage and a bonus of 30 percent of
profits, earlier held a second six-hour strike on Monday after
similar action on Friday.

The labor group has also vowed to protest against sending more
troops to Iraq after the killing of a South Korean hostage by
Muslim militants last week. The labor minister has urged unions
not to link strikes to the deployment.

Separately, unionized workers at KorAm Bank, the country's
sixth-biggest lender, which was recently bought by Citigroup Inc,
entered its fifth day of strike to seek job security, disrupting
operations at most of its branch offices.

Unionized workers at Hyundai's affiliate Kia Motors Corp
started an eight hour strike on Tuesday, while smaller rival
Ssangyong Motor Co will hold a four-hour strike.

Foreign investors cite labor unrest as the number one
deterrent to doing business in Korea and local share prices
suffer from the so-called 'Korea discount', linked to poor
corporate governance as well as frequent industrial unrest.

The South Korean market is trading at a combined price to
forecast earnings multiple of 6.75, well below Hong Kong's 13.78
and Japan's 19.45.

Although union action is prominent, Korea has one of the
lowest trade union membership ratios in the world and large
swathes of the economy are unaffected by the latest strikes. Only
one worker in eight is in a union, government data shows.

Despite the threat of a broader walk-out, analysts said they
did not expect the current labour dispute to be violent or
disruptive as some previous strikes that took weeks to end.

"This year's labour dispute may not be as intense or prolonged
as the previous ones, which is what the market seems to be
expecting," said Mark Yoon, an analyst at Merrill Lynch in a note
to its clients.

A labor dispute at Hyundai last year went on for 45 days.

Goldman Sachs said Hyundai's inventory level stood at slightly
over one month in Korea, or over 60,000 units, and almost three
months in the United States, which would provide it with a
sufficient buffer to weather the strike.

"With the union aware that it could actually be helping out
management by voluntarily walking out and producing less, thereby
clearing inventory, the strike is not as potent as it might have
been amidst a better sales environment," Merrill's Yoon said.

Shares in Hyundai Motor were up 0.6 percent at 42,250 won by
0424 GMT, broadly in line with the broader market's 0.23 percent
gain.

KorAm was unchanged at 15,500 won, Kia was 0.11 percent higher
at 9,500 and Ssangyong lost 1.07 percent at 7,420.