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HRDMEL03 Special Topics in HRDM HR Problems in Hyundai Motor Corporation
Group 3 Marphie Daus Jonathan Obispo Iekinella Duran Krysa Marie Daaco Krystal De Leon
Submitted to: Silverio Ramon DC. Salunson, MBA
Federation of Korea Trade Union (FKTU). the company like all the other chaebols. To survive. Corporate Restructuring. the government intervened to force a negotiated settlement between the union and the management. Hyundai managed to establish itself all over the world as a company producing reliable. to workers. faced serious financial problems. formed in 1967. Daewoo Group. Southeast Asian Crisis. The company offered various retirement schemes. Compensation Plan. was a part of the large South Korean Chaebol . Management-Union Relationship.Abstract: Hyundai Motor Co.. The unions refused to compromise and the management too held its ground. By the late 90s.the Hyundai Group . etc. Ulsan Plant. Chaebols. General Motors. Hyundai Group. when Southeast Asian crisis struck. it had to cut its labor force. Issues: » Damage that unhappy management-labor relations can cause to an organization Key Words: Hyundai Motor Co. technically sound and stylish automobiles. International Monetary Fund (IMF). the company started aggressive overseas expansion programs. Korean Confederation of Trade Unions (KCTU). In the last four decades. and expressed its inability to support its entire workforce in the slack period. Labor Unions. Finally. Voluntary Retirement Schemes.until the group split in September 2000.. . unpaid leave for two years. In the 90s.
HMC operated the world’s largest integrated automobile manufacturing facility in Ulsan. Hyundai had acquired the necessary economies of scale to compete on an equal footing with the world’s leading automakers. HMC increased its size by acquiring Kia Motors (another Korean auto company) in 1998. opening a central region office near Chicago. In 1987. and sold its first car. led by Hyundai’s plants in India. HMC began production at its new Chunju plant (in southwest Korea) and Asan plant (southeast of Seoul). Turkey. in Garden Grove. Hyundai’s automotive technology centers employed approximately 4.9 million units while overseas capacity was 500. subsidiary. California. including the new Hyundai-Kia Motors Design & Technical Center in Irvine. In February 1986.S. Hyundai concentrated its sales efforts primarily on the west and east coasts. With a total global production capacity of 2. As of 2002. California. In 1995 and 1996. the company began to build nationwide operations and service networks to more effectively . the biggest Korean Chaebol until the late 1990s. although Hyundai and Kia continued to operate independently. In the early years. with an annual budget of 5 percent of current revenues. As Hyundai diversified and upgraded its product line. the subcompact Excel. as well as in the southern states. these three plants accounted for 1.Company Profile HMC HISTORY AND ORGANIZATION HMC was established by Ju-Young Chung in 1967 as a subsidiary of Hyundai Corporation. Hyundai Motor America (HMA). and China. Hyundai launched its U. Hyundai expanded into the central portion of the United States. in the U. which opened in February of 2003. on Korea’s southeast coast.100 researchers (of which 100 were located in California).4 million units per annum.000 units. Hyundai also operated eight Korean and four international research centers. market.S. HMC was the auto sales leader in the Korean domestic market and exported vehicles to over 190 countries.
000 by 2010. it moved its national headquarters to a new 18-acre site in Fountain Valley. the Excel was replaced by the all-new subcompact Accent. automobile assembly plant. the Sonata. Hyundai planed to increase the capacity to 500.serve the needs of dealers and customers. In 1988. to be built on 1. HMA opened a $21 million. Alabama for its first U. In 1995. In April of 2002.S. the president and CEO of HMA. In the fall of 2000. 300. The company took a major step to becoming a full-line automotive importer/distributor in 1989 with the introduction of its midsize sedan. after 10 years in the U. The vehicles . market.000 vehicles per year at maximum capacity. As of 2003.S. HCD-I and HCD-II. As of 2002. Hyundai broke ground in Montgomery.000 people. The facility. A year after that. Hyundai had four regional offices and approximately 600 dealerships nationwide.6 million. The compact Elantra sedan debuted in 1991 as a 1992 model. HMA opened a $16. Hyundai marketed a full line of vehicles including six models in 16 trim levels. Finbarr O’Neill. noted that Hyundai would “go from having a 4-month pipeline (from Korea) to a much shorter time period.600 acres. a $1. In 1997. For 2002. Hyundai introduced the sporty Tiburon coupe. HMA added two new vehicles to its lineup: the Santa Fe sport utility vehicle and the XG300 sedan. California.000 square-foot office complex and parts distribution center in Aurora. California. Illinois.0 (XG300) to 3. 342. this headquarters also housed HMA’s western regional office. was expected to produce 300. which emerged from the Hyundai California Design Center’s two concept roadsters.S.000 squarefoot parts distribution center in Ontario.” Suk-Jang Lee was also full of confidence and emphasized a symbolic advantage. In addition to corporate offices. In 1990. the engine displacement of the XG300 moved from 3.5 liters (XG350). and it quickly became Hyundai’s best-selling model in the U.14 billion investment scheduled to open in 2005 and employ 2. This plant was regarded by Hyundai and outsiders as a key element in Hyundai’s plan to become one of the world’s top five manufacturers by 2010.
Hyundai Corporation has further diversified its business portfolio by expanding into new businesses. it has become a world-class player in the shipbuilding industry by establishing Qingdao Hyundai Shipbuilding. and emerging technologies such as solar and wind power. and home audio/video systems. a Chinese subsidiary specializing in the construction of mid-sized commercial vessels. At the end of 2009. the world’s undisputed leader in shipbuilding. Notably. Hyundai Corporation is also working with select partners to bring Hyundai-branded electronics and other consumer products to households worldwide. Hyundai Corporation is now well-poised to become one of the world’s top solutions providers for any number of commercial and industrial needs.were developed exclusively by HMC and were fitted with engines and transmissions designed by the Hyundai California Design Center as well as HMC. . heavy equipment. digital cameras. with resources. In recent years. and has seen remarkable growth in the sale of mobile phones. sector and regional expertise. Hyundai Corporation became an affiliate of Hyundai Heavy Industries. and individual talents second to none.
South Korea's largest automobile manufacturer was in the midst of acute labor problems in the late 1990s and early 2000s. Members of the Hyundai group such as the Hyundai Construction and Engineering and Hynix Semiconductor were also facing financial troubles at the time. However. Until the mid 1990s. Founder chairman of the Hyundai Group. most of these chaebols felt the need to downsize. and were on the brink of insolvency."Regretting the continuous labor unrest. Hyundai had been successful in handling South Korea's traditionally disruptive labor unions. The labor unions. It had kept strikes at bay with nearly double-digit pay hikes and other benefits. But the Southeast Asian crisis and the general slump in the automobile industry in the late 1990s forced the company to restructure and cut down jobs. There was also mounting pressure from the IMF on the South Korean government to undertake strict economic reforms and restructuring measures. Chung Ju-yung commented. By the late 1990s. he said.Introduction The Hyundai Motor Co. "Wages have doubled in three years and productivity has gone down. "We are losing our international competitiveness. . felt threatened. which have traditionally been very strong and influential in South Korea. During the economic slump of the late 1990s. the Hyundai labor union and workers rebelled against the management's efforts to restructure the organization and the company faced strikes and worker unrest repeatedly from late 1990s to early 2000s." The labor problems Hyundai faced were not an isolated case in South Korea. (Hyundai). the chaebols had grown into large mismanaged structures with many having several unprofitable units.
Daewoo and LG contributed 9% of GDP. The top four chaebols at that time . Between mid 1960s and mid 1990s. Hyundai was among those that were hit the most. all over South Korea. Although. But a series of five-year plans. South Korea focused on agricultural development. automobile production.Since jobs were being cut. expansion plans and company policies were made by the members of the founding families. the first of which was implemented in 1962.Samsung. the annual GDP expanded by more than nine percent annually. . economic policies were geared towards industrial growth. Chaebols were industrial groups that were established after the Korean War in early 1950s. who occupied the top positions in the chaebols. All decisions. Business in South Korea was predominantly controlled by a few large conglomerates or chaebols. The industries of electronics. South Korea has shown an incredible growth pattern. chemicals. ship building and steel were the major thrust areas. social unrest and a feeling of insecurity among the labor class was rising. Hyundai. In 1995. companies were facing labor unrest. An Overview of the South Korean Economy Until 1960. telecommunication. Export promotion and import substitution were the key elements in South Korea's growth plans. They differed from other corporate organizations in the sense that they were still largely controlled by their founding families and were not managed by professional corporate managers. greatly altered the economic structure of South Korea. Starting from 1962. the top 30 chaebols alone accounted for nearly 16% of South Korea's GDP. The unions resorted to extreme measures in an effort to establish their authority.
The domestic automobile sector had negative growth of almost 55% in 1998 compared to the previous year. The automobile segment was among the first to be hit by the downslide in the economy.From being at par with some of the poorer countries of Asia and Africa in 1960. eighteen times that of North Korea and at par with some of the less prosperous economies of the European Union. encouragement of savings and investment over consumption .availability of credit. import of raw material and technology. its GDP per capita in 2003 was seven times that of India.in mind. HMC also suffered from nearly seven weeks of labor strikes in summer 2003 and caved in to virtually all the union’s demands to end the strike. This remarkable success has been a result of close cooperation between the government and the chaebols. the markets were heavily protected by quotas and tariffs. workers at the Ulsan plant went on a two days strike in December 2001. 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 management group HMC was drawn into the unprecedented vortex of labor strikes in 1987 and 1988 which resulted in huge sales losses. sponsorship of specific industries. Moreover. A. Government policies were framed keeping the industrialists' demands . To encourage domestic industry. . demanding higher wages and higher bonuses. import restriction. Existing Problem Labor management disputes arise from late 1990’s to early 2000’s.
Labour Problems in the Early 2000s On September 1.000 employees from about 125 companies participated in demonstrations against Hyundai and the government's decision. Seoul. . Hyundai forecasted its highest profits ever . The decision of the company to lay off workers sparked off agitations not only in Hyundai but in other companies too. 32. Korea .000 workforce in South Korea and to cut pay bonuses and benefits in a bid to save 230 billion won. Hyundai had one of the most powerful and militant unions. The domestic sales of the company fell by 55% in the year 1998 and its exports crashed by 74 percent to only 15.$900 million for the year. Unfortunately for the management of the company.000 riot police to control the demonstrators. Hyundai officially cut ties with the Hyundai Group and had relocated its head office to Yangjae-dong.a move that was seen as symbolic of its rebirth as an independent automotive business group. All across South Korea almost 120.Hyundai was responsible for almost 50% of total automobile production in South Korea and was therefore badly hit. According to company officials. In a demonstration in Ulsan. The government had to deploy nearly 20. where Hyundai has its biggest automobile plant. Hyundai recorded a 200 billion won loss in 1998. The unions were particularly offended at the government's approval of Hyundai's decision. 2000. In December 2001. In May.000 employees participated in rallies.65 million vehicles were operating at only 40 percent of their capacity. 1998.056 units. Hyundai's six assembly plants with a yearly production capacity of 1. Hyundai reacted to this grim situation by announcing plans to lay off 27 percent of its 46.
Hyundai vehicles were being accepted as a technologically advanced. reorganization and new market exploration. Most importantly. stylish and reliable in overseas markets like the US and Europe. But the success story was marred by another strike threat in Hyundai.In the same year.4 percent growth in unit sales and a 74. it posted 23. This was an era of growth. the world's largest auto market. Hyundai recorded a 42 percent sales increase in 2001. . In the United States.5 percent improvement in net income.
Hyundai cars were becoming less competitive in international markets and profitability consequently would be hurt. and lastly. South Asian crisis and general slump of the automobile industry). it could not afford performance bonuses to the tune of 30% of profit. B. and its competitors. their culture is one of the factors that cause labor – management disputes. who are also facing labor unrest. the increased influx of imported cars into South Korea was bound to hurt Hyundai's market share and margins in South Korea. demanding higher wages and higher bonuses. The top management was occupied by the family members. External forces which include the economic environment (economic recession. hierarchical organizational structure and centralized decision making of the company were some causes of the problem. The autocratic leadership style present in the company. final decisions resides to the family. The HMC is a family oriented corporation. Moreover. The reasons given were: firstly. triggered the problems faced by the company. the internal forces also cause the . the most important reason stated was that due to the appreciation of the Korean won.Workers at the Ulsan plant went on a two-day strike in December 2001. Causes of the Existing Problem Since Hyundai is part of Chaebol. General Motors' purchase of Daewoo was a threat that could not be ignored or taken lightly. that though the company had done well that year. The management clarified. They also demanded a 30% share in the profits that year as a performance bonus. and the company had to gear itself up to be able to compete with General Motors. political environment (government’s approval to the decision of the company to restructure and cut down jobs). Secondly.
restructuring the company. in many different situations. and downsizing. The Hyundai Motor Company suffered strikes from its labor. Given that. Effects of the Problem The first labor union was in the Ulsan Plant in the year 1987. Hyundai can be very flexible. . Also the reputation of the company had been stained due to the poor performance of the labor which leads to poor quality performance and a decline in the production. financially and strategically. They also want to see 30-percent of total company net income be returned to employees in the form of bonuses. Labor union. it can be quicker and more efficient than its rivals. C.problem. Therefore. D. Hyundai’s sales fall due to the labor management disputes and the strikes made by the labor union. It includes the employees who are aggressive and powerful. SWOT Analysis Strength (Solution) Flexibility Hyundai Motors is still considered to be small in American market. Successful training can serve the company as its strength in coping to the problem of the organization. Direct Training The company should conduct direct training to rebuild and institutionalize positive values and attitudes. whenever Hyundai chooses to implement its strategy. are threatening to take action unless they receive better pay and reduced work hours. These are the causes of the labor – management disputes in the Hyundai Motor Company.
Weakness Labor Management Disputes Labor – Management disputes present in Hyundai Motor Company is there weakness in competing to their competitors. This method is a key element of labor-management cooperation programs. It would be a constraint in attaining the success that the company desires. It would be strength of the company if it had a equitable wage. Equitable Wage The company should pay the employees which is compensable and equitable to its job. They would work hard in return they would have a good performance and increase in quality production and sales. Having this would affect the productivity of the company also to their sales and revenues. The wage of the employee is equal to the responsibilities of the employees. Moreover the production process will gradually decrease due to the unhappy labor management relationship present in the organization. It is most commonly used when a conflict is not highly polarized and prior to the parties forming "hard line" positions. . Have a method of settling disputes Cooperative problem-solving It is a positive effort by the parties to collaborate rather than compete to resolve a dispute. It would be strength of the company if the employees are empowered. Empowerment The company should empower its employees for the employees to be motivated and feel valued and important in attaining the success of the company.
Hyundai was threatened because Daewoo was purchase by General Motors. General Motors General Motors' purchase of Daewoo.Opportunities Strikes The frequent shutdown of plant operations due to strikes pushed the company to find plant sites abroad. Threats Overflow of Used Vehicles Current U. used car market is very saturated due to the huge influx of lease returned vehicles and car owners looking to sell their vehicles. .S. This causes an overall drop of all used car available. Thus the company cannot afford to give the demand of the labor to have performance bonuses to the tune of 30% of profit. Hyundai’s financial aspect is not that bad compare to the other companies affected by the Southeast Asian Crisis and general slump in the automobile industry. Financial Crisis The financial crisis experienced by the US could be an opportunity for the company to purchase other businesses and to be more diversified in their business.
This decision of the company was approved by the government. expansion plans and company policies were made by the members of the founding family. HMC is part of the Chaebols. the companies need to take actions in order to leverage the performance of their businesses. it is not only Hyundai who faced labor unrest. . Management HMC have an authoritarian leadership style because it is a family oriented company.Culture Chaebols are corporate organizations that where still largely controlled by their founding families. It has a centralized decision making which makes all decision making process slow due to its hierarchical organization structure. The labor union rebelled against the management action. External and Internal Forces Southeast Asian crisis and general slump in the automobile industry makes US experienced economics recession and financial crisis. Hyundai decided to restructure the company and cut down jobs to leverage their performance. Well in fact. even the other companies face labor unrest. The kind of management that the companies have contributes to the causes of labor management disputes because employees do not have that much freedom to express their ideas due to the authoritarian leadership style of the company. Thus. All the decisions. The top management was occupied by the family members and final decisions reside to the family. So it is their culture to be a family oriented. So the company faced strike and worker unrest repeatedly.
The company faced labor strikes and worker unrest. management. The internal and external factors that may affect the management labor relationship should be treated seriously to prevent labor management disputes. management. Conclusion The Hyundai Motor Corporation is one of the four chaebols in South Korea. Hyundai have collective powerful employees. the top management should empower the employees in order to boost their morale and be more motivated to deliver their jobs. All decision. Moreover they have aggressive union thus the labor union was against the management efforts to restructure and cut down jobs. Chaebols are corporation organizations that were still largely controlled by their founding families. Management should improve its strategies to steer and manage the Human Resource in the way that harmonious relationship between management exists. internal and external forces – causes the labor management disputes in the Hyundai Motor Company in late 1990s to early 2000s. Who occupied the top positions in the chaebols. Though culture is really hard to change. expansion plans and company policies were made by the members of the founding families.should be given careful attention in order to ensure a well organized harmonious labor management relationship.Restructuring the organization allows the company to downsize and lay off employees.culture. The Labor Management Disputes faced by HMC was the result of their action to restructure the company and cut down jobs due to the Southeast Asian crisis and the general slump in the automobile industry. . The aforementioned factors – culture. These factors . internal force and external force . Top management should give importance to its employees.
Labor must be committed to the effective functioning of the production system to maintain and improve rapidly adjusting production processes. Having a harmonious labor – management relationship would lead to the success of the company. It would help the company to attain a competitive advantage using Human Resource. The company should improve their management style and strategies in dealing to their employees.Skilled workforces were necessary key to decisions about how to organize production and arrange the process of product development. .