SEOUL (Reuters) - Hyundai Motor (005380.KS) on Thursday reached a tentative wage deal with its South Korean labor union leaders, ending the second-costliest strike in the firm’s 45-year history.
If approved by members, the deal will allow the carmaker to avert further walkouts that have cut production and slowed its sales growth, and ease the risk of a re-emergence of workforce militancy.
In July and August the union staged a series of partial strikes over pay and conditions, its first in four years and an echo of the 1980s and 1990s, when industrial action was a more common feature of corporate Korea.
The walkouts stopped Hyundai making cars worth 1.59 trillion Korean won ($1.40 billion), production losses which will have a short-term impact on sales and earnings.
The firm will try to make up for the missing units with extra work later this year, analysts and company officials said, an expectation reflected in a largely unmoved share price.
“Hyundai’s second-quarter sales and earnings will be smaller than expected because of the strike,” said Lee Sang-hyun, an analyst at NH Investment & Securities in Seoul.
“Hyundai’s August sales, which will be released on Monday, will suffer. Not only domestic sales but overseas sales will suffer because of reduced exports,” he said.
As of Wednesday, the strikes left Hyundai 76,723 vehicles short, lost production which has directly affected sales because the firm keeps a low inventory.
Hyundai’s U.S. vehicle exports from South Korea slumped by a quarter in July from June, and global sales in July expanded at their slowest in 16 months.
A company executive told Reuters on Wednesday that it may miss its overseas sales target for September because it shipped fewer vehicles overseas this month, but on an annual basis, its sales target should be met.
Along with its affiliate Kia Motors, Hyundai is the world’s fifth biggest carmaker by sales. The firm is part of the Hyundai Motor Group conglomerate, one of South Korea’s powerful ‘chaebol’ businesses, which is owned by chairman Chung Mong-koo.
The deal between union leaders and company management, which has been under discussion since May, includes a 5.4 percent rise in basic salaries, a bonus equivalent to five months’ salary plus a 9.6 million Korean won ($8,500) payment for each worker.
The two sides also agreed to scrap the overnight shift at South Korean factories from March 2013, a move which previously raised concerns from the company about lower production.
Under the new scheme, Hyundai will shorten working hours and introduce two shifts of eight hours and nine hours apiece instead of the current two 10-hour shifts.
Hyundai said it will be able to make up reduced output by raising productivity with an additional facility investment of 300 billion won.
The new shift scheme will help “improve the health and quality of life of employees,” Hyundai said in a statement.
Union members will vote on the wage agreement on Monday, a spokesman said.
“It remains to be seen whether the deal will be approved by union members given their different interests. We did our best and reached a better wage deal than last year,” said Kwon Oh-il, a spokesman for Hyundai Motor.
Shares in Hyundai Motor were up 0.2 percent at 0446 GMT, outperforming the Seoul index .KS11 which was down 1.26 percent.
“I have been covering the auto industry for years, and strikes have historically rarely impacted shares because automakers usually make up lost production later,” said Choi Dae-shik, an analyst at BS Investment & Securities. ($1 = 1133.4500 Korean won) (Editing by Daniel Magnowski)