[Column] Labor Union Demands Record High Bonuses Despite Steel Industry Slump

A severe cold wave has swept through the steel industry. With steel demand declining due to the economic downturn and increasing uncertainty in the trade environment caused by US-China tensions, there appears to be no breakthrough in sight. Cheap imported products are invading the domestic market, leaving even the home turf vulnerable. Factories that should be operating busily, emitting intense heat, are shutting down one after another. At this critical moment, steel workers have launched an unexpected off-site protest.

The Hyundai Steel labor union has been protesting near the residence of Chung Eui-sun, Chairman of Hyundai Motor Group, since the 10th. After wage and collective bargaining negotiations with the company failed to progress well last year, they staged a protest at the Pangyo headquarters in Gyeonggi Province and are now pressuring the group’s top executive.

What are they demanding? The union is asking the company for a base salary increase of 159,800 KRW (excluding seniority increments) and a “record-breaking” performance bonus. They also proposed a 10 million KRW interest-free loan for two years when purchasing vehicles and a 20% vehicle discount every three years for retirees. It is necessary to objectively assess whether these demands are reasonable and whether the company can accept them.

Let’s look at Hyundai Steel’s performance. Hyundai Steel’s operating profit reached only 205.3 billion KRW through the third quarter of last year. It is expected to fall short of market expectations, ending the year in the 300 billion KRW range. This represents a sharp 60% drop compared to the 798.3 billion KRW operating profit in 2023. The company argues that if it pays wages and bonuses as the union demands, it will exhaust last year’s operating profit and still fall short.

Where does the union’s logic for demanding performance bonuses, ignoring the company’s reality, come from? Even a three-year-old would understand that it targets the parent group, Hyundai Motor Group, which is recording record-high profits. Hyundai Motor Group is enjoying a boom, recording the highest sales volume in the US market.

The logic is that since they supplied materials for well-selling cars, they should share in the profits. To use an analogy, it is similar to the domestic paper industry suggesting sharing royalties with authors and publishers who have won literary awards.

Moreover, although the union can express its demands through legitimate industrial actions at the workplace, it chose off-site protests. Protests in residential neighborhoods are causing inconvenience to residents unrelated to wage and labor negotiations.

Last year, Hyundai Steel planned to shut down its Pohang plant, which had an operating rate in the 10% range. The Pohang plant, which mainly produces long steel products used in construction materials, was hit hard by the slowdown in the construction market. However, due to union opposition, some facilities were restarted, and the full shutdown was postponed by reducing the two-shift, two-team work system. While workers kept their jobs, the company’s operational efficiency declined, leaving a factor that could worsen profitability in the long term.

Seo Kang-hyun, CEO of Hyundai Steel, announced at the steel industry’s New Year gathering held the day before that they are considering building a steel mill in the US. If the plant leaves, workers will lose their livelihoods. It is hoped that reasonable discussions will take place so that both the company survives and workers receive fair compensation.