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Hyundai Motor plans to join Gwangju-run factory

June 02,2018
Hyundai Motor on Friday announced plans to join Gwangju’s city-owned automobile factory project, and the automaker’s labor union is putting up a fight over the plan’s potential effect on employees’ wages.

Korea’s largest automaker said that it submitted a letter of intent to invest in the construction of the factory, along with other companies, in response to Gwangju’s request.

“In regard to Gwangju’s business, which will be built inside the Bitgreen National Industrial Complex and aims to foster the local economy and jobs, [Hyundai Motor] proposed a consultation to review the business’ validity and investment possibility,” Hyundai Motor wrote in its letter of intent.

The carmaker will not participate in the joint venture’s management and will only invest in a certain amount of the project. The workers will be employed by the city of Gwangju.

The amount of production from the Gwangju plant will depend on the market demand for the car that Hyundai plans to produce there, according to the automaker.

Gwangju’s auto factory project is slated to be completed by 2020. It is part of the city’s initiative to expand employment, though the salaries at the plant will be half of the Korean auto industry’s average. The plant will be the first automobile factory built in Korea since Renault Samsung Motors’ Busan factory in 1998.

Hyundai Motor’s participation is likely to send a jolt to the labor market, as employees at the plant will receive an average of 40 million won ($37,233) in annual pay. This is less than half of the wages of unionized Hyundai Motor employees, which are estimated to be around 90 million won a year.

Hyundai Motor’s labor union on Friday requested the carmaker withdraw the proposal, claiming that its participation in the project would cause a drop in the average wages of Hyundai Motor workers.

It warned Hyundai Motor that it would stage a protest if the company doesn’t withdraw the letter of intent.

“The Gwangju employment [project] will standardize full-time workers’ annual salary at around 40 million won,” the labor union said in a statement Friday. “The employees are neither contract workers nor full-time workers, but somewhere in the middle.”

Although the city government would be employing the workers at the new factory, if Hyundai Motor becomes the biggest shareholder in the joint venture, the lower wages at the Gwangju factory could have an effect on the automaker’s unionized employees.

Hyundai Motor’s unionized employees’ high wages have been a big headache for the carmaker, which is why the company hasn’t invested much in domestic plants recently and has been steering its capital toward its overseas manufacturing facilities.

According to industry data, Hyundai Motor and Kia Motors’ Korean production fell to 44 percent of total production in 2017, compared to 73.3 percent in 2006.

Gwangju’s new auto plant is likely to receive about 500 billion won in investment and will be able to produce about 100,000 cars a year. It will provide jobs to around 12,000 people through direct or indirect employment. Hyundai Motor’s stake in the new factory will likely stay below 20 percent.

“The plant will not be operated by Hyundai Motor,” an official from the Gwangju city government said.


BY JIN EUN-SOO, YOON JUNG-MIN [jin.eunsoo@joongang.co.kr]