The virtue of endurance

In the summer of 2018, I visited the Volvo factory located in Torslanda, Gothenburg, Sweden. I asked an official about what happened in the 2008 global financial crisis, when the car manufacturer was acquired by Geely Auto, a Chinese automobile manufacturer. Back then, the production decreased by 30 percent, and about 2,500 employees lost their jobs as a result.

Volvo has a strong union with three out of nine board directors being union members. However, it has never experienced a strike. Understanding the reality facing the company, the labor union asked the management to create a popular model and increase employment back to its previous levels. “I cannot recall the last time a strike took place,” an official at Volvo said. “We have a strong union, but it responds flexibly to the situations the company is in.” The production and employment of the facility in Torslanda are now back to its pre-recession levels.

In contrast, 2020 seems to be a “strike-ridden” year for Korea’s automobile industry. Kia Motors’ labor union will go on partial strikes from Monday through Friday claiming that it failed reach an agreement with management on wages and collective bargaining. Tired of strikes, Renault Samsung Motors has closed down its factory.

Renault Samsung Motors has been going through a rough patch since last year when a decision was made to discontinue Nissan Rogue, approximately half of the automaker’s production. Management asked the union for understanding, emphasizing this was a critical moment for the company as it needed to secure the production of Nissan’s new model XM3, but to no avail. The union struck for about 500 hours in 2018 and 2019, which cost the manufacturer 450 billion won in lost revenue. All this seemed to have come to an end last year when management and labor finally reached an agreement on wages and the union agreed not to go on a strike. However, everything is back to square one with the union staging strikes in various forms without prior notice over wages and collective bargaining for 2020. It is estimated that the strikes for the past three weeks have cost the company about 110 billion won.

Renault Samsung Motors has resorted to closing down the factory with no end date. Its production facility in Busan has the highest hourly wage among its factories across the world. Still, the union is refusing to back down. It now plans to travel to Seoul to protest. Last year saw car production in Korea drop below four million units, which was the production level in 2008. Four million was considered a benchmark against which the health of Korea’s car industry could be measured. Dropping below that number meant the industry was going downhill.

This crisis can be attributed to many factors, but conflicts between management and labor are surely one of them. All unions of South Korean automobile manufactures, except for Hyundai Motor, struck last year.

Strikes mean lower factory utilization, and lower factory utilization means lower production. Five major Korean car manufacturers sold 1.53 million units in the domestic market, while selling 6.39 million in overseas markets, 0.8 percent and 4.5 percent down from the previous year, respectively.

Employees have the right to strike, which is possible when they have companies to work for. They should remember a lack of courage was not the reason why Volvo factory workers who were laid off 10 years ago did not go on a strike.


bjk@donga.com