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Viewing cable 07SEOUL97, THE EMPLOYER STRIKES BACK: HYUNDAI SUES ITS UNION

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Reference ID Created Released Classification Origin
07SEOUL97 2007-01-11 08:25 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Seoul
VZCZCXYZ0000
RR RUEHWEB

DE RUEHUL #0097/01 0110825
ZNR UUUUU ZZH
R 110825Z JAN 07
FM AMEMBASSY SEOUL
TO RUEHC/SECSTATE WASHDC 2314
INFO RUEHBJ/AMEMBASSY BEIJING 1863
RUEHKO/AMEMBASSY TOKYO 1956
RHHMUNA/CDR USPACOM HONOLULU HI
RUALSFJ/COMUSJAPAN YOKOTA AB JA
RHMFISS/COMUSKOREA J2 SEOUL KOR
RHMFISS/COMUSKOREA J5 SEOUL KOR
RHMFISS/COMUSKOREA SCJS SEOUL KOR
RHEHNSC/NSC WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC//OSD/ISA/EAP//
UNCLAS SEOUL 000097 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
E.O. 12958: N/A 
TAGS: ELAB PGOV PREL KS
SUBJECT: THE EMPLOYER STRIKES BACK: HYUNDAI SUES ITS UNION 
 
REF: 06 SEOUL 4194 
 
SUMMARY 
------- 
 
1. (SBU)  After a year during which Hyundai Motors recorded 
an estimated 1.8 billion dollars in lost sales due to labor 
disruptions, management decided to reduce the amount of 
year-end bonuses for its workers and only pay 100 percent of 
a month's salary as opposed to the typical 150 percent. 
During the annual New Year's ceremony on January 3, outraged 
workers clashed with security guards and assaulted Ulsan 
plant manager Yoon Yeo-chul.  Hyundai responded by filing 
civil suits against 26 union members for their actions on 
January 3 and ongoing labor slowdowns that have further 
impacted production levels.  Neither side is showing any sign 
of backing down as union members rallied at the Hyundai 
Corporate headquarters in Seoul on January 10 and further 
threatened to hold massive walkouts next week. 
 
A YEAR OF DISCONTENT 
-------------------- 
 
2. (U)  Hyundai's union went on strike 13 times in 2006, 
causing production losses of 1.6 trillion won (1.8 billion 
dollars), the highest annual strike damage in the company's 
history.  Hyundai management alleges that they met with union 
officials in mid-2006 and agreed to cut bonuses if they did 
not meet production targets.  The union claims that the 
automaker made an oral promise to pay the 150 percent bonus 
regardless of the production target.  In late December, the 
automaker decided that it would only pay the 100 percent 
bonus as production only reached 98 percent of the annual 
target.  As word of the reduced bonus reached workers, they 
immediately went into a slow down, refusing to work overtime 
or weekends.  Since the slow down began on December 28, the 
company has already recorded lost production of 7,752 cars 
worth an estimated 120 billion won. 
 
3. (U)  The situation further escalated on January 3 during 
the annual opening ceremony to mark the start of production 
in the New Year.  Union members first tried to prevent 
Hyundai executives and superintendents from entering the hall 
where the ceremony was being held.  While Vice President Kim 
Dong-jin delivered his speech, workers began spraying fire 
extinguishers and disrupted the event.  A scuffle ensued 
where ten security guards were injured and plant manager Yoon 
Yeo-chul was assaulted by union leader Park Yoo-ki.  Days 
later, Hyundai announced it was filing a one billion won 
lawsuit (1.1 million dollars) against 26 union members 
involved in the January 3 incident and who were responsible 
for the initiating the work slow down.  Hyundai has filed 
suit against its union nine times since 2000 but most were 
later withdrawn.  Vice Chairman Kim Dong-jin said "We will 
never withdraw this suit.  We will make the union take 
responsibility and pay compensation." 
 
 
4. (U)  At a rally in front of Hyundai Motors Headquarters in 
Seoul on January 10, the union demanded that Hyundai pay the 
remainder of the bonus or face widespread strikes beginning 
on January 15.  At his regular press briefing, Labor Minister 
Lee Sang-soo threatened "stern legal action" if the union 
decides to hold an illegal strike.  Hyundai also responded 
firmly to the union's threat by saying the protestors would 
be fined three days' pay for taking a collective day off 
without permission. 
 
KCTU CALLS FOR AN APOLOGY 
------------------------- 
 
5. (U)  The typically radical umbrella organization, Korean 
Confederation of Trade Unions or KCTU, spoke out in support 
of Hyundai and said that the union members should apologize 
for disrupting the New Year's celebration.  Some speculate 
that KCTU's comments were motivated by a heightened awareness 
that the public is frustrated with militant labor actions and 
the ripple effect they have on the local community.  KCTU did 
not fully back away from its support of the union members and 
argued that workers should receive at least 50 percent of the 
unpaid bonus and cancel the pending lawsuit. 
 
BLEMISH ON THE HYUNDAI NAME 
--------------------------- 
 
6. (SBU)  A recent editorial expressed a growing national 
concern as a result of the labor unrest at Hyundai. 
Recognizing that Hyundai is one of only a few Korean 
companies with global recognition, the author was concerned 
that damage to the brand name could have significant impacts 
on the already struggling Korean economy.  An anonymous 
posting on a Korean web portal said that consumers may be 
less likely to trust a product that was manufactured amid 
such a contentious relationship between management and labor, 
calling into question the quality of work being performed by 
disgruntled workers.  Despite these public concerns, Hyundai 
announced on January 2 that it plans to sell 9.4 percent more 
vehicles this year by stepping up production at overseas 
plants in China and the U.S. 
 
COMMENT 
------- 
 
7. (SBU)  The Hyundai situation sheds light on a number of 
issues that are not unique to this company or this industry. 
Concerns about the relatively high cost of Korean workers and 
rigid labor laws are often cited as major stumbling blocks 
for foreign investors when considering investments in Korea. 
While labor unions try to remain viable amid growing public 
criticism and increasingly tighter government controls 
(reftel), they may be more likely to take a softer line in 
the media to help improve their image.  KCTU is scheduled to 
elect a new president this month.  The public will take note 
of who is elected to replace the current president, 
considered a moderate, as it will likely be a decision that 
has a broad impact on labor relations throughout Korea.  The 
general public is less likely to tolerate radical labor 
actions in the coming year following a year when the media 
and public both regarded violent labor actions as 
irresponsible and unnecessary. 
VERSHBOW