January 30, 2019 / 9:19 AM / 5 months ago

South Korean city OKs revised plan for low-wage carmaking JV with Hyundai

SEOUL (Reuters) - A South Korean city council on Wednesday green lit a revised plan for a low-wage automaking joint venture with Hyundai Motor, setting the stage for the construction of the car maker’s first factory at home in more than two decades.

FILE PHOTO: The logo of Hyundai Motor is seen at its dealership in Seoul, South Korea, April 26, 2017. REUTERS/Kim Hong-Ji/File Photo

The proposed plant in the southwestern city of Gwangju is in line with Seoul’s policy to spur job creation, but comes as Hyundai is grappling with excess capacity globally amid sluggish domestic demand, falling U.S. exports and weak China sales.

With unemployment rates hitting a 17-year peak in 2018, South Korean President Moon Jae-in has called on the country’s biggest automaker to build a local factory. The liberal government counts Gwangju as its political stronghold.

The city council said it aims to sign the deal with Hyundai on Thursday after final negotiations and, according to a city official, Moon is expected to attend the signing ceremony.

A preliminary deal for the JV had been reached early last month. It included an annual wage of 35 million won ($31,341.51) for JV employees, or less than half the average 92 million won that the automaker’s unionized workers earn.

But the plan was scuttled as labor representatives in the city council called for a revision to terms that allow the JV to skip annual wage negotiations with its workers.

Hyundai had spurned the proposal.

The council has now agreed on a compromised plan regarding collective wage bargaining, the city official said, without elaborating because of the confidentiality of the matter.

Hyundai’s labor union released a statement, saying it will “fight strongly” against the company and the government. The union worries the JV would put downward pressure on wages, and eventually take away production and jobs.

A Hyundai spokeswoman did not have immediate comments.

At the proposed JV, Hyundai is looking to build mini-SUVs starting 2021, with an annual capacity of 100,000 vehicles.

Since its factory in the central city of Asan in 1996, Hyundai has not built new production facilities in South Korea - home to high-wage, strike-prone workers.

It has instead focused on setting up overseas production units, such as in the world’s largest auto market China, in search of cheaper labor and to be closer to consumers.

Reporting by Hyunjoo Jin; Editing by Himani Sarkar

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