Hyundai Motor avoided an annual strike for the first time in eight years when it reached a tentative wage deal with unionized workers.
Hyundai’s labor union in South Korea has gone on strike in all but four years since it was organized in 1987, despite criticism of its repeated industrial action.
“This year’s agreement is meaningful as the management and union has drawn a tentative agreement without a nearly conventionalized strike, considering the national crisis caused by Japan’s tightened export regulation,” Hyundai Motor said on Wednesday.
The union said in a separate statement that they considered worldwide sluggish automobile demand stemming from the US-China trade dispute and the economic slowdown in South Korea when they agreed to terms of the wage deal. The union also stressed that they took the Korea-Japan trade dispute into account.
The Japanese government dropped South Korea from a “white list” of countries favored in trade, effective Wednesday, following strengthened regulations on exports of semiconductor materials. About 1,100 items that Korea imports from Japan appear to be subject to tighter export controls.
Under the tentative agreement, Workers will receive a performance-based one-off salary of 3 million won and 150% of the monthly wage, another seniority-based one-time payment of 2 to 6 million won with a basic salary increase of 1.74%.
Through this agreement on millions of one-off payments, Labor and management resolved a legal dispute related to regular payment and simplified wage schemes putting various bonus payments into a regular one.
The tentative deal needs approval by union members in a vote next week. An industry analyst was positive on the deal.
“It is unusual since the agreement was reached without a strike, and this is positive for Hyundai,” Cho Soo-hong, an auto sector analyst of NH Investment and Securities, told Asia Times. “There was a legal issue regarding regular payments, which could cause strikes. With this agreement, uncertainties with regular payment issues were solved to a large degree, lessening the risk of a strike.”
A 1.74% hike in basic salary is the lowest since 2009. However, Cho said this year’s overall salary increase at Hyundai is expected to be slightly higher than last year due to the one-off payment, but a weak won will help the firm maintain profitability.
“I had expected Hyundai to post 4.2 trillion won of operating profit this year. Car sales will be sluggish, but a weak won will work positively for earnings. I don’t see any reason to change my view due to the wage deal,” he said.
Hyundai posted about 2 trillion won of operating profit in the first half of this year.