Thousands of workers of Hyundai Motor Co. (KRX:005380) went on strike at the company’s plant at Seoul in South Korea on Monday. This was the first full strike in country’s largest automobile maker in the last 12 years. About 50,000 workers at the plant went on a partial 6-hour strike on Tuesday morning as well.
70% of the company’s employees went on strike. The strikes are expected to continue for the remaining of this week. Last July too, there was a strike at the plant. But it was partial and did not cripple the entire production.
It has crippled the production of vehicles, even as the company is sitting on a large pile of resources. The strike at Hyundai has crippled the production of vehicles that were to be shipped to the Middle East, US, and many Asian markets. 40% of Hyundai’s vehicles are made at the plants in South Korea.
The company issued a statement, saying that, “While we are obviously disappointed with any temporary stoppage in production, we still continue to work with our labor union to resolve this issue as quickly as possible”.
South Korean Businesses Under Pressure
Businesses in the country are facing challenges in recent times. Samsung recently had to recall their premium product the Galaxy Note 7 smartphone from around the world. Hanjin Shipping Co. too, which is South Korea’s biggest shipping business by capacity, filed for bankruptcy in August. Many businesses, including the Hyundai Heavy Industries Co., are in debt and is currently restructuring.
Hyundai in Trouble
Hyundai Motor Co. (KRX:005380) too is trying to fight poor sales in many important markets. China is the main market of Hyundai, followed by the United States. Analysts are saying that this strike is likely to cause supply shortage in the coming months. This is bad news as many potential buyers could switch to other automobiles.
The company’s Santa Fe and Tucson models are likely to be the worst affected by this strike. Hyundai has been trying to increase the production of these SUVs because the company’s sedans are not doing too well.
The trade ministry of South Korea has said that the exports are likely to go down by $1.3 billion if this strike continues till the end of the week.
Meanwhile, workers at Hyundai’s affiliate Kia Motors have also said that they might also go on a partial strike soon in demand of higher wages.