HR Problems in Hyundai Motor Co.

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Case Details:

Case Code : HROB058
Case Length : 12 Pages
Period : 1960-2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Hyundai Motor Co.
Industry : Auto and Ancillaries
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"If the company refuses to accept our demands, we have no choice but to go on a full-fledged strike. As the union leader, I cannot control the anger of the union."

-Hyundai union leader Kim Kwang-shik, July 1998.¹

"Laws and principles, along with dialogue and compromise, should be adhered to in dealing with labor issues."

-Choi Kil-seon, president and CEO of Ulsan-based Hyundai Heavy Industries in an interview to The Washington Times, June 2003.²

Introduction

The Hyundai Motor Co. (Hyundai), South Korea's largest automobile manufacturer was in the midst of acute labor problems in the late 1990s and early 2000s. Until the mid 1990s, Hyundai had been successful in handling South Korea's traditionally disruptive labor unions. It had kept strikes at bay with nearly double-digit pay hikes and other benefits. But the Southeast Asian crisis³ and the general slump in the automobile industry in the late 1990s forced the company to restructure and cut down jobs. However, the Hyundai labor union and workers rebelled against the management's efforts to restructure the organization and the company faced strikes and worker unrest repeatedly from late 1990s to early 2000s.

Members of the Hyundai group⁴ such as the Hyundai Construction and Engineering and Hynix Semiconductor were also facing financial troubles at the time, and were on the brink of insolvency.

Founder chairman of the Hyundai Group, Chung Ju-yung commented, "We are losing our international competitiveness."⁵ Regretting the continuous labor unrest, he said, "Wages have doubled in three years and productivity has gone down."⁶

The labor problems Hyundai faced were not an isolated case in South Korea. By the late 1990s, the chaebols had grown into large mismanaged structures with many having several unprofitable units. During the economic slump of the late 1990s, most of these chaebols felt the need to downsize.

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1] Mike Head, "Auto layoffs spark general strike call in Korea", www.wsws.org, 23 July, 1998.

2] Jong heon Lee, "Korea jolted by labor protests", The Washington Times, June 26, 2003.

3] The Southeast Asian crisis happened due to a shortage of foreign exchange that had caused the value of currencies and equity shares in Thailand, Indonesia, South Korea and other Southeast Asian currencies to fall drastically.

4] Hyundai Group, a large multinational conglomerate (or chaebol) of South Korea was involved in many businesses including ship building, car manufacturing, construction, retailing, financing and electronics. Later, some companies of the group such as Hyundai Motor Company, Hyundai Heavy Industries, Hyundai Engineering and Construction were split off into separate companies.

5] Lawrence Minard, "The Tiger was just napping", Forbes, April, 1991, Vol. 147 Issue 5, p140.

6] Lawrence Minard, "The Tiger was just napping", Forbes, April 1991, Vol. 147 Issue 5, p140.