Widespread Production Disruptions and Potential Strikes... Consumers Ask, "When Will the Cars Be Available?"

Hyundai Motor Faces Production Disruption of 70,000 Units in First Half
'Export Survival' Korean GM and Renault Samsung Also on Edge

[Asia Economy Reporters Jehoon Yoo, Gimin Lee] As the summer vacation season approaches, the automotive industry is once again facing concerns over production disruptions. With vehicle semiconductor supply shortages causing frequent production delays, the situation could worsen significantly if strikes occur on top of this, leading not only to further delays in vehicle deliveries but also potentially impacting the currently smooth export performance.

Production Disruptions Continue Amid Strike Threats... Consumers Growing Anxious

According to industry sources on the 2nd, Hyundai Motor's cumulative production shortfall in the first half of the year reached approximately 70,000 units. This is the result of shutdowns and suspension of overtime due to vehicle semiconductor supply shortages, combined with adjusted working hours caused by COVID-19.

Although semiconductor supply has somewhat stabilized this month, reducing production disruptions, a full recovery is still difficult to expect. Hyundai Motor is reportedly still experiencing supply shortages of some key components such as Engine Control Units (ECU). This issue is not unique to Hyundai. According to the Korea Automobile Manufacturers Association (KAMA), the cumulative production volume of domestic automakers from January to May decreased by about 7% compared to 2019, before the COVID-19 pandemic.

As the possibility of strikes and resulting production disruptions becomes more tangible, consumers are growing increasingly restless. With vehicle semiconductor shortages already causing routine delivery delays, the addition of strikes could prolong this situation even further. For example, the domestic first dedicated electric vehicle model, Ioniq 5, currently has a waiting period of over one year, while the compact SUV Tucson requires about eight months for delivery.

The recent positive momentum in exports is also expected to be affected. Hyundai Motor and Kia recorded a historic high sales volume of 804,944 units in the U.S. market during the first half of this year. However, if strikes materialize, combined with the structural limitations of semiconductor shortages, there are concerns that exports could suffer negative impacts.

Samsung Securities also pointed out in a report released on the same day, "With expected shortages of business days in the third quarter due to summer vacations, Chuseok holidays, and line construction at the Asan plant (related to Ioniq 6), the possibility of strikes adds to the situation," noting that "this lowers expectations for production and sales growth compared to the previous year in the third quarter."

This is not just a Hyundai issue. Foreign automakers, which rely heavily on exports, will inevitably suffer significant damage if production disruptions worsen. Korea GM, whose labor union has announced a strike vote next week, has been severely affected by semiconductor shortages since February, reducing plant operating rates to 50%. Industry estimates suggest Korea GM experienced production shortfalls of about 30,000 units in the first half of the year alone.

Although operations at Bupyeong Plant 1, which produces the ‘boy head of household’ Trailblazer, have recently normalized, providing some relief, if the Korea GM union proceeds with a strike, this progress could be undone.

Renault Samsung, which depends heavily on European exports of the XM3 (known as New Arkana in Europe), also faces challenges in labor relations. Having already suffered losses amounting to 106 billion KRW due to strikes and other issues in the first half, any disruption in XM3 production, which began full-scale sales last month, would inevitably impact future plans.

‘COVID-19 Bill’ Raises Issues of Retirement Age Extension and Industrial Transition Agreements

The problem is that negotiations are not expected to proceed smoothly, as unions are bringing up the ‘COVID-19 bill.’ Hyundai Motor agreed early last year to a wage freeze amid the COVID-19 outbreak, concluding negotiations without disputes. Kia also experienced strike-related turbulence but ultimately agreed to a wage freeze. Korea GM has maintained a wage freeze for three consecutive years until last year.

Accordingly, the unions are taking a tough stance. Hyundai Motor’s union released a statement the day before, saying, "Last year, while other large companies and public enterprises raised wages and boosted employee morale with generous bonuses, we agreed to a wage freeze and insufficient bonuses to share social difficulties and concluded negotiations without disputes," emphasizing, "The average wage of our members does not even rank within the top 50 among large companies. No more sacrifices can be made."

Recently, the Hyundai Motor office and research staff union, mainly composed of the MZ generation (born in the 1980s to 2000s), which opposes the traditionally production-focused union, also shares a unanimous stance on wage issues. Lee Gun-woo, chairman of the office and research staff union, clearly opposed, stating, "If our opinion that bonuses should be fairly distributed based on reasonable criteria had been accepted, employee anger would not have reached this level."

The demands for retirement age extension (to 64 years old) and industrial transition agreements, jointly requested by the Hyundai Motor, Kia, and Korea GM unions along with their parent union, the Korean Metal Workers' Union, also darken the outlook for negotiations. Both retirement age extension and industrial transition agreements are linked to management strategies, making it difficult for management to accept or commit to these demands.

Professor Kim Pil-soo of Daelim University said, "Despite the vehicle semiconductor supply shortage issue, automobile exports rose significantly in the first and second quarters," adding, "However, if unions enter into a series of strikes at this stage, the fragile momentum of exports that has just been nurtured could be extinguished."

This content was produced with the assistance of AI translation services.