HR Problems in Hyundai Motor Co.
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Case Code : HROB058
Case Length : 12 Pages
Period : 1960-2004
Pub Date : 2004
Teaching Note :Not Available
Organization : Hyundai Motor Co.
Industry : Auto and Ancillaries
Countries : India
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Labour Problems in the Late 1990s
The slump in the South Korean economy in late 1990s was bound to have an effect
on Hyundai also. The automobile segment was among the first to be hit by the
downslide in the economy. The domestic automobile sector had negative growth of
almost 55% in 1998 compared to the previous year.
Hyundai was responsible for almost 50% of total automobile production in South
Korea and was therefore badly hit. The domestic sales of the company fell by 55%
in the year 1998 and its exports crashed by 74 percent to only 15,056 units .
Hyundai recorded a 200 billion won loss in 1998.
According to company officials, Hyundai's six assembly plants
with a yearly production capacity of 1.65 million vehicles, were operating at
only 40 percent of their capacity. In May, 1998, Hyundai reacted to this grim
situation by announcing plans to lay off 27 percent of its 46,000 workforce in
South Korea and to cut pay bonuses and benefits in a bid to save 230 billion
Unfortunately for the management of the company, Hyundai had one of the most
powerful and militant unions. The decision of the company to lay off workers
sparked off agitations not only in Hyundai but in other companies too. The
unions were particularly offended at the government's approval of Hyundai's
In a demonstration in Ulsan, where Hyundai has its biggest automobile plant,
32,000 employees participated in rallies. All across South Korea almost 1,20,000
employees from about 125 companies participated in demonstrations against
Hyundai and the government's decision. The government had to deploy nearly
20,000 riot police to control the demonstrators...
Labour Problems in the Early
On September 1, 2000, Hyundai officially cut ties with the Hyundai Group and
had relocated its head office to Yangjae-dong, Seoul, Korea - a move that
was seen as symbolic of its rebirth as an independent automotive business
group . In December 2001, Hyundai forecasted its highest profits ever - $900
million for the year.
In the same year, it posted 23.4 percent growth in unit sales and a
74.5 percent improvement in net income. Most importantly, Hyundai
vehicles were being accepted as a technologically advanced, stylish
and reliable in overseas markets like the US and Europe. In the
United States, the world's largest auto market, Hyundai recorded a
42 percent sales increase in 2001.
This was an era of growth, reorganization and new market
exploration. But the success story was marred by another strike
threat in Hyundai.
Workers at the Ulsan plant went on a two-day strike in
December 2001, demanding higher wages and higher bonuses. They also demanded a
30% share in the profits that year as a performance bonus.
The management clarified, that though the company had done well that year, it
could not afford performance bonuses to the tune of 30% of profit. The reasons
given were: firstly, the increased influx of imported cars into South Korea was
bound to hurt Hyundai's market share and margins in South Korea.
Secondly, General Motors' purchase of Daewoo was a threat that could not be
ignored or taken lightly, and the company had to gear itself up to be able to
compete with General Motors, and lastly, the most important reason stated was
that due to the appreciation of the Korean won, Hyundai cars were becoming less
competitive in international markets and profitability consequently would be