Despite union problems, Hyundai doesn’t give up on South Korea image

Hyundai Motor Co. workers returned to office a former union leader seen as more moderate than the incumbent, who led strikes that caused record annual production losses at South Korea’s largest automaker.

Lee Kyung Hoon, 52, was backed by 52 percent of the 47,000-member union in a vote on Nov. 8, defeating Ha Bu Young, 53, according to the union’s website. Lee will replace Moon Yong Moon, whose leadership over the past two years came to be considered a sign of resurgent militancy at South Korean labor unions amid a shift of production overseas. Hyundai Motor, which has suffered strikes in 22 of the past 26 years, had its longest stretch of uninterrupted production during Lee’s previous term, from 2009 to 2011.

Its seven domestic plants have driven Hyundai to become the world’s fifth-largest auto manufacturer, but are now a legacy asset that needs to be addressed to sustain profit growth. It may make more sense, economically, for the company to close a plant it built 45 years ago – one of five in Ulsan – that is now its oldest and costliest facility.

But Hyundai says it won’t give up its Korean base – much as Toyota rejects the idea of stopping production in Japan – and says that fixing productivity issues with its strong domestic union is a top priority.

“People ask us why we don’t just produce overseas, given all the labor troubles at home. But our home market is our root and the base for our growth overseas. And there’s a risk in building cars overseas,” said a Hyundai executive from the team that manages its labor relations.

“Our Korean plants will continue to serve as a global manufacturing base, and we plan to increase not just production but also productivity and quality at our domestic plants,” the company said in a statement.

Hyundai’s production base in Ulsan – the world’s largest single car complex and the Korean city with the highest per capita income – gives it significant economies of scale and provides the backbone of its global expansion, knitting together 380 suppliers and 5,000 second- and third-tier suppliers around the country.

Hyundai, though, is increasingly reliant on overseas production. The portion of vehicles it produces at home has halved to 43 % of its global output from a decade ago – as it has opened facilities in the United States, China and Brazil. Hyundai produced 4.4 million vehicles globally last year.

Via Reuters, Bloomberg