Last Hope XM3 Released... Renault Samsung Still Haunted by 'Strike Nightmare'

[Asia Economy Reporter Kiho Sung] Renault Samsung Motors is once again plagued by the "strike nightmare" just before the launch of its fate-deciding new sports utility vehicle (SUV), the 'XM3.' With the wage negotiations dragging into the new year and deepening the divide between labor and management, the labor union is toying with the strike card. If the strike follows amid the spread of the novel coronavirus infection (COVID-19), Renault Samsung Motors could enter a critical crisis phase that threatens its survival.

According to the automotive industry on the 26th, the Renault Samsung Motors labor union convened a dispute countermeasure committee meeting the day before to discuss whether to strike. The union decided to continue negotiations with the company until the 27th and to revisit the issue if no progress is made. If a strike occurs in line with the XM3 launch timing, the new car production schedule will inevitably be disrupted. The industry expects a strike if negotiations do not progress by the end of this week.

Renault Samsung Motors labor and management have been negotiating over whether to raise the base salary since September last year, extending into the new year. The labor-management issues, which had seen partial strikes and workplace closures and then a temporary lull, have recently worsened again. The wage differences in January and February between union members who participated in the strike and those who did not became a trigger for conflict.

According to the Labor Standards Act, workers must work at least 15 hours a week to be eligible for weekly holiday pay. However, due to strikes in December last year and January this year, many union members failed to meet this condition, deepening the emotional rift between labor and management. The union proposes creating a 'Labor-Management Coexistence Fund' to compensate the losses of striking union members, but the company insists on adhering to the 'no work, no pay' principle.

If a strike occurs, the XM3, which is about to be launched, will inevitably suffer significant damage. Depending on the timing of the strike, the supply of XM3, which needs to capitalize on the 'new car effect,' could be disrupted. The new car effect is an opportunity that automakers can never give up. Due to increased interest from the new car launch, some models sell about half of their annual sales target within the first 3 to 4 months.

The XM3 has been spotlighted as the promising model responsible for Renault Samsung's performance this year. Last month, Renault Samsung Motors sold 4,303 units in the domestic market, a 16.8% decrease compared to the same period last year. Among these, the QM6 sold 3,540 units, accounting for 82.26% of total sales. To reduce dependence on the QM6 and secure stable profits, the success of the XM3, the first new model in four years, is crucial.

The XM3 also needs to play an important role in the export market. Due to labor-management issues, Renault Samsung Motors has not yet secured export volumes from the headquarters. Considering that the consigned production of the Nissan Rogue, which ends in March this year, is about 100,000 units annually, the XM3 must secure a similar volume. If labor-management conflicts lead to failure in securing volumes, the Busan plant, with an annual capacity of 200,000 units, could see its production halved.

An industry insider said, "New car contracts made early after launch are critical enough to determine the model's success," adding, "The launch event scheduled for March 3-4 was canceled due to concerns over the spread of COVID-19, and if a strike follows, the success of the XM3 cannot be guaranteed, so a prompt reconciliation between labor and management is necessary."