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Summer of labor unrest looms in S Korea

Tens of thousands of workers of Hyundai Motor Co take part in a strike yesterday to demand better pay and working conditions. The strike halted operations on the company's assembly line, a spokesman for Hyundai said in Seoul. PHOTO: EPA

About 40,000 unionized workers at South Korea's top car maker, Hyundai Motor Co, began a two-day strike yesterday 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 US and Japanese car makers, whose wages are flat or growing slowly, and strengthen its push to move car plants to Europe and the US.

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 were due to lay down tools yesterday, according to the union group, which has a total of 600,000 members.

Hyundai has a total workforce of 50,000. The strike comes after wage negotiations between Hyundai's management and its union unravelled. 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.

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 yesterday, 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 labor dispute to be violent or disruptive as some previous strikes that took weeks to end.

"This year's labor 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.

"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.
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