Hyundai Tackles Unionized Labor Rates By Investing In Contract Manufacturing Plant Before EV Shift

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Hyundai has helped establish an independent auto plant in the southwest region of South Korea. The facility is the first new car plant to open in the country in 23 years. It will be operated by Gwangju Global Motors (GGM), a newly established company led by the city government of Gwangju, and it plans to produce 70,000 vehicles per year. 

The plant is reported to be seen as a solution to Hyundai’s issues with unionized labor, with factory workers at Hyundai’s own plants repeatedly campaigning for higher wages and disruptions to production not uncommon if demands aren’t met.

According to a report from Nikkei Asiathe GGM plant has been established without a union. The average labor rates at Hyundai’s in-house facilities are 88 million won ($74,400), close to Toyota Motor. However, the GGM plant workers, who will be provided with housing and benefits by the government to help them maintain their quality of life, will be paid less than half of that, at 35 million won ($29,600), which is also below the national average of 42 million won ($35,500) for company employees.

See: Hyundai Will Invest $1.1 Billion To Build Two New Hydrogen Fuel Cell Facilities In Korea

Although not wholly-owned by Hyundai, the carmaker has a 19 percent stake in GGM. The city of Gwangju has a majority share of 21 percent, while Gwangju Bank and Industrial Bank of Korea each have 11 percent each. Other local companies make up the remainder.

The move has been crucial in the pricing and positioning of the new Hyundai Casper. Starting at 13.85 million won ($11,700), the low-priced mini SUV had already sold 10,000 units before shipments began.

But the formation of the GGM plant is not just significant for Hyundai’s efforts to bring low-cost cars to market. With an EV shift on the horizon, it’s an open secret that the less complicated construction will require fewer workers. Production of the Ioniq 5 was threatened earlier in the year when union officials contested the hours and number of workers needed to make the EV at the Ulsan plant in Korea.

While the report says that Hyundai is still working on outsourcing simulations, mainly for small cars, the formation of an independent, union-free, and so-called “half wage factory” could be significant for the brand.