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Hynix's union pitches in to save firm

Jung Sang-young, president of Hynix Semiconductor Inc's union, has the close-cropped hair, steely gaze and forceful manner common to most South Korean labor leaders. It's his message that's different.

"Conflict isn't the way to get what we want," says Jung, 37, in an interview in a building where lights are off in many rooms as the third-largest chipmaker tries to avoid bankruptcy.

That's a new tune in a country where in the past year Kookmin Bank workers barricaded their chief executive in his office to oppose an acquisition that made it Korea's biggest bank and Daewoo Motors Co activists set fire to police cars storming a plant they'd occupied to protest a sale to General Motors Corp.

Making a difference

The conciliatory tone of Hynix's union made a difference.

Last month, creditors agreed to exchange about 3 trillion won (US$2.3 billion) of its debt for shares and extend 650 billion won in new loans. Union support may still be needed as the bailout, the second this year, still left the company with about 3.5 trillion won in debt.

"Unlike the labor union at Daewoo Motor Co and others, the union members at Hynix were very cooperative," said Chung Hyung-ryang, head of the credit risk division at Korea Exchange Bank, which is leading efforts to keep the company in business.

Vital cooperation

The cooperation of unions was also vital in the company's attempts to live up to its promise to creditors to raise 1 trillion won through selling assets and businesses this year. By spinning off all of its non-semiconductor operations the company has already passed that target but in the process cut staff by about 5,000 to 15,000.

Even that may not be enough as the market for Hynix's chips is forecast to fall as much as 67 percent this year as personal computer sales are set to decline for the first time since the 1980s. The company had losses of 3.7 trillion won in the first nine months of the year.

A 51 percent jump in the spot market price of memory chips in the past six weeks gives some hope that prices and sales have reached the bottom.

"I'm starting to see some hope for Hynix," said Kang In-ho, who manages 400 billion won at CJ Investment Trust Management Co in Seoul, who is not allowed to buy the stock as his company still considers it too risky.

"I don't think it's going to get any worse for chipmakers and chip prices are on a good run."

Faced with Hynix's very survival in question, Jung sought advice from union leaders at Daewoo Motor, whose campaign almost undermined the US$2.6 billion purchase of the Korean automaker by General Motors. He decided on a "different path," even as he faced criticism for sacrificing a quarter of his union's members.

"Change has been coming and we didn't accept it," he said.

He called for a meeting with the company's then new chief executive officer, Park Chong-sup. Park outlined for Jung what was needed to raise the cash to keep the company afloat.

After having the plan checked by economics professors, Jung agreed not to oppose it, with one key proviso: the new management would have to brief workers on the company's financial situation.

"We had to know how much we owed and to whom," Jung said.

The union leader's proposal was taken on board by Park -- a former CitiBank manager -- who began regular updates through e-mail and meetings on the progress of Hynix's attempts to sell assets and persuade creditors of the need for more time to pay debts.

While such practices are common in other countries, such contact between workers and senior management are almost unheard of in Korea, where executives were often transferred in from unrelated companies in the business group.

Hynix broke away from that tradition in June last year when it cut ties with the Hyundai Group and changed its name from Hyundai Electronics Industries Co. The new spirit of cooperation came as a surprise to workers.

Tearing down `walls'

"A lot of the walls which separated those above and those below have come down," said Kim Dae-sig, a manager at one of Hynix's chip production lines. "We began to feel that senior management were much more focused on operations."

That has translated into greater efficiency, staff say.

You Ja-ok, 25, who has been working on one of Hynix's chip production lines for the last six years, said the attitude and behavior of staff has changed as they seek to do what they can to help the chipmaker.

By handling the silicone wafers that she helps process more carefully, You has helped the company raise its productivity levels comparable to those of competitors such as industry leader Samsung Electronics Co, the company says.

According to Hynix officials, more careful handling of the silicone wafers from which chips are cut and packaged reduces the amount of particles produced during the chipmaking process. Less dust in the air means fewer chips are damaged, boosting the production levels at Hynix plants.

Even so, Hynix's union leader remains cautious about the performance of the company's new management.

"They have done all they could to address the liquidity problems but we will have to wait and see how good they are at running a semiconductor company," he said.
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