Kia’s decision to join the Korean Metal Workers’ Union’s strike — demanding the resignation of President Yoon Suk Yeol amidst the ongoing martial law crisis — could lead to increased production disruptions for the carmaker, industry sources said Wednesday.
The strike is part of the Korean Confederation of Trade Unions, the nation’s largest umbrella labor group with 1.2 million members, which has launched an indefinite strike until Yoon offers to resign, claiming that his declaration of martial law was “an act of rebellion.”
Kia’s three car manufacturing plants in Gwangmyeong, Hwaseong and Gwangju have since suspended operation of their production lines for four hours during daytime and nighttime shifts.
“Kia’s labor union’s strike is planned to last for one day, although whether the strike will be extended or expanded is undecided yet,” said an official from Hyundai Motor Group. “Hyundai Motor Company’s labor union will not be participating in the strike this time.”
Though estimates for strike related-losses have not been disclosed, industry sources say it would be affecting the production of approximately 2,000 vehicles for one day. Earlier in the month, Kia’s bigger sibling Hyundai Motor’s labor union launched a two-day partial strike for eight hours which reportedly resulted in a production shortage of 4,000 to 5,000 units.
Industry insiders say unlike Kia, Hyundai Motor is unlikely to engage in further production shutdowns, in fear of possibly losing benefits gained during this year’s collective wage agreement that outlined hefty wage hikes and bonuses.
“Hyundai Motor’s labor union might face pressure to join the strike,” said a source familiar with the matter on condition of anonymity. “But Hyundai’s union has not necessarily aligned with Kia on political strikes. If the union members shut down production, it would lead to lower wages and bonuses -- little incentive to push forward a strike with a lost cause.”
However, if the auto giant decides to take part in the nationwide strike, it could bring about large-scale production setbacks. During the 2016 impeachment protests against former President Park Geun-hye, Hyundai and Kia faced 24 and 22 partial strikes, resulting in losses exceeding 3 trillion won ($2.1 billion) and 1.9 trillion won, respectively.
Experts say Kia’s labor union’s strike, if extended, would be also detrimental to fulfilling the car manufacturer’s export target. In January, Kia set a target 2.6 million units higher than last year, while Hyundai Motor cut its target by 1,000 units. Kia’s key export models are Niro, Sportage and Carnival SUVs.
“Intertwining labor disputes with political issues has little ground for justification,” said Kim Pil-su, a car engineering professor at Daelim University. “With the escalating strikes, it might be difficult to boost production for this month -- a critical timeline that decides this year’s production volume.”
But Kim added that due to the soaring won-dollar exchange rate, Kia’s export losses might not be devastating. In this year’s quarterly conference calls, Kia, along with Hyundai Motor, announced that their revenue increased due to favorable exchange rate conditions. The two carmakers’ business plan for this year was based on an exchange rate of 1,270 won, but the average daily won-dollar exchange rate has exceeded 1,300 won since the beginning of the year and is currently in the 1,400 won range due to the impact of martial law.
