Hyundai, Kia Face Potential Earnings Impact From Planned Strikes
08/07/2012| 08:50am US/Eastern
--South Korea's top three car makers face possible lost output from planned strikes
--Unions at Hyundai, Kia, GM Korea plan strikes this week to seek higher pay, better conditions
--Analysts say prolonged labor action may have an impact on their third-quarter earnings
(Rewrites throughout, with strike details, analyst comment)
By Kyong-Ae Choi
SEOUL--As workers at Hyundai Motor Co. (>> Hyundai Motor Co) and its group affiliate Kia Motors Corp. (>> Kia Motors Corporation) have decided to go on strikes this week to seek higher wages and better working conditions, South Korea's biggest automotive group could face a potential blow to its earnings for the current quarter if the labor action continues beyond the planned dates.
The unions of Hyundai and Kia announced their strike plans Tuesday. While Hyundai's union plans its first strike Wednesday, Kia's union plans to start its strike on Friday.
The planned strikes come at a time Hyundai and Kia, which together form the world's fifth-largest automaker by sales, continue to see robust demand for their cars. The companies have been enjoying solid earnings so far this year despite the slowdown in the global economy. Hyundai owns 34% of Kia, which is part of the Hyundai Motor Group.
The latest labor action also follows recent strikes at Hyundai and Kia in July, which resulted in lost output of 14,080 vehicles, worth 269.4 billion Korean won ($239 million), for the two companies combined.
Analysts said further strikes will likely hurt sales at Hyundai and Kia, as their inventories are already at record-low levels after they saw strong demand for their cars earlier this year.
After a Hyundai union leadership meeting Tuesday, Kwon Oh-il, the union's spokesman, said that the workers now plan to go on a strike for four to eight hours a day on Aug. 8-10, Aug. 13-14 and Aug. 17.
Kia's union said it plans an eight-hour strike on Aug. 10 and will refuse to work overtime from Aug. 13, until they reach an agreement with the company.
While the companies may be able to make up for the lost output later by putting in more overtime work, the labor action may drag on if the companies fail to reach an agreement with the workers, said Suh Sung-moon, an analyst at Korea Investment & Securities. A prolonged labor action "means a blow to their third-quarter results," Mr. Suh said.
Hyundai and Kia were not immediately available for comments on the planned strikes.
Meanwhile, workers at GM Korea Co., the South Korean unit of Detroit-based General Motors Co. (>> General Motors Company), also plan to stage a strike for eight hours a day on Aug. 8-9, according GM Korea union spokesman Choi Jong-hak. GM Korea is the country's third biggest automaker, but much smaller than Hyundai and Kia.
GM Korea was hit by strikes last month and suffered lost output of about 12,000 vehicles.
The three unions at Hyundai, Kia and GM Korea, which belong to a larger industry union, are asking for a monthly pay increase of KRW151,696 ($133) and want an end to night shifts, with all staff leaving assembly lines before midnight after eight hours of work.
Write to Kyong-Ae Choi at email@example.com
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