Hyundai and Kia Unions Settle Wage Negotiations
Agree on Record-breaking Wage Increase
Is this a drop in the bucket compared to U.S. unions?
Hyundai and Kia’s unions recently concluded long-standing wage negotiations. They agreed on the highest-ever wage increase, which includes a basic wage increase of 111,000 KRW ($93), a 300% performance bonus plus 8 million KRW ($6,720), a 100% achievement bonus for production and sales targets, a special bonus of 2.5 million KRW ($2,100), a traditional market gift voucher of 250,000 KRW ($210), and free shares worth 2.8 million KRW ($2,352).
Not long after, noteworthy news came from abroad. The United Auto Workers (UAW) reached a tentative agreement with GM, following Ford and Stellantis. With a groundbreaking 25% wage increase, there are predictions of a sharp rise in new car prices.
Hourly Wage of $44.80, Earning a Six-figure Salary in Three Years
According to recent foreign reports, Ford and Stellantis have agreed to increase wages by 25% over the next four and a half years. As a result, the current hourly wage of $32 (approximately 42,880 KRW) is expected to rise to a final $40 (approximately 53,600 KRW). Assuming a 40-hour work week, this equates to an annual salary of $83,200 (approximately 115.7 million KRW). The starting hourly wage for new workers will increase by 68% to $28 (approximately 37,548 KRW).)
GM is facing even more significant expenditures along with this wage increase, as the cost-of-living allowance, abolished in 2009, has been reinstated. The work required to become a regular employee has been shortened to nine months, and the time needed to reach the maximum wage has been significantly reduced from eight years to three years. This means that employees can earn a six-figure salary just three years after joining the company. According to local media, the wage increase over the next four years is expected to be higher than the total increase over the past 22 years.
Cost Increases by $950 to $1,000 Per Vehicle
Will Consumers Bear the Burden of Labor Costs?
The unprecedented rapid wage increase is expected to increase the labor cost burden of the U.S. auto industry. GM, which has the best welfare benefits among the Big 3, is expected to spend $7 billion (approximately 9.387 trillion KRW) on labor costs over the next four years. Ford predicts that the cost per vehicle will increase by $850 to $900 (approximately 1.14 to 1.21 million KRW). Therefore, there are predictions that manufacturers’ labor cost burdens will be passed on to consumers over time.)
However, the impact of this strike is expected to be concentrated on specific models, such as midsize trucks and SUVs, and not all vehicle prices will increase. The UAW has also pushed back against predictions of price increases. They argue that new car prices have risen by 30% over the past four years, even as workers’ wages have been frozen, so the wage increase should not be linked.
What Impact Will It Have on the Domestic Market?
Long-term Price Increase Seems Inevitable
There is growing interest in the impact of the UAW’s wage increase on the domestic car market. Currently, there are 25 models from six brands, including Chevrolet, GMC, Ford, and Lincoln, that are produced and imported from the U.S. for sale in South Korea. According to industry sources, Stellantis and Ford do not expect an immediate price increase.GM Korea is expected to have little impact on prices as the volume of imports is insignificant and not focused on major U.S. models. However, as expenditure burdens are expected to increase gradually, a long-term price increase seems inevitable. The recently model-changed Chevrolet Trax Crossover, although domestically produced, saw a price increase of 1.2 to 1.28 million KRW ($1,008 to $1,074) for each trim due to increased raw material costs.
By. Lee Jung Hyun
Most Commented