SsangYong Motor’s labor union leader requested the automaker’s sales and marketing division chief for a meeting last month, after hearing news that its sales are slumping. When the division chief replied the sales volume declined in April after posting strong numbers thanks to the introduction of new models including the Rexton and the Korando SUVs from January to March, the union leader said, “Is there anything we can do to help?”
SsangYong Motor is the red. The company has been suffering losses ever since the year 2009 except 2016. As a result, the automaker was not able to make any loans from domestic banks for years, and hence its debt ratio is zero. Its major stakeholder, Mahindra Cars of India, has injected capital amounting to nearly 100 billion won (84 million U.S. dollars) in two installments, but there is a limit to an amount of capital even Mahindra Cars can inject in a money-losing firm. SsangYong can pay salaries to employees only when it improves profitability by increasing its plant operating ratio. The union is well aware of this.
The same is true with Renault Samsung Motor, whose union and management tentatively reached salary and collective agreement for 2018 recently after a prolonged dispute that continued for 11 months. Renault Samsung’s union pushed ahead to go on as many as 62 partial walkouts since October last year, demanding pay raise and its stronger voice when redistributing vehicles to production lines, and finally made the deal only after gaining all it wanted.
Meanwhile, the company’s business performance slumped. As of April, its cumulative sales came to 52,930, down 39.6 percent year on year. The company was expected to produce 100,000 units of Nissan’s Rogue SUV, which accounts for half of the automaker’s production, through consignment production arrangement this year, but the number has declined to 60,000 units. It is not even certain at this point whether it will be able to secure any production volume for next year. If the unionists hold a vote on the agreement for 2018 on Tuesday, the company should start negotiations for salary and collective bargaining for 2019 next month.
Hyundai Heavy Industries’ union also started to stage partial walkout recently. The main issue for this company is proposed “relocation of the head office to Seoul.” Hyundai Heavy Industries, which acquired Daewoo Shipbuilding & Marine Engineering, plans to split Hyundai Heavy Industries into Korea Shipbuilding & Marine Engineering (KSME), an intermediary holding company, and Hyundai Heavy Industries responsible for business on May 31. As the company chose to move KSME’s headquarters to Seoul, the union is on strike to block the split of the merged company.
The shipbuilding and heavy industry barely managed to regain viability due to rebounding demand for LNG tankers only this year, after seeing their business performance nosedive due to slumping global demand and intensifying competition with China. Furthermore, Hyundai Heavy, which actually builds and exports ships, will continue to be headquartered in Ulsan.
KSME is a new organization that aims to focus on research and development by placing under its umbrella Hyundai Heavy Industries, DSME, Hyundai Samho Heavy Industries and Hyundai Mipo Dockyard. The company made a strategic decision to have its headquarters in Seoul to be able to recruit talented human resources and step up R&D, because it cannot win over China and stay No. 1 in the world if it merely continues building conventional ships. We wonder whether such a business decision can be a cause for labor strike.