Labor-Management Deals That Break Management Principles Erode Corporate Competitiveness

Hyundai Motor’s labor and management have reached a tentative agreement on this year’s wage negotiations. It came 111 days after the first round of talks began and only after the company’s first full-scale strike in 10 years. The agreement includes a 100,000 won increase in base pay, a 400% performance bonus, a one-time payment of 12.7 million won, and the new hiring of 500 technical workers. It was also agreed that even if the statutory retirement age is extended, the current wage peak system will not be expanded further.

If this tentative agreement was pushed through under the pressure of strikes, there is reason for concern. The union went on strike for 60 hours this year. As production disruptions continue and the burden on suppliers grows, pressure on management to reach a quick settlement inevitably intensifies.

In such a situation, the agreement also includes provisions that affect long-term costs, such as the base pay increase and retirement-age-related measures. Even if restarting production is urgent, management’s judgment on cost structures and long-term competitiveness must not be pushed aside.

Wages should be aligned with productivity and a company’s ability to pay. It is only natural for workers who contribute to a company’s performance to receive appropriate compensation. However, performance and market conditions must be considered together. If bargaining power influences wages more than productivity does, the principle of compensation based on performance will inevitably be undermined.

The union cited Hyundai Motor’s high net profit and increased retained earnings as grounds for raising wages. It is reasonable to pay a certain amount of performance bonuses when business results are strong. However, there is no guarantee that last year’s high profits will continue into the future.

Retained earnings, too, are not cash sitting in a vault. A substantial portion has already been invested in production facilities and various assets, and it serves as a foundation supporting the company’s financial stability and future investment. If fixed costs are increased on the basis of short-term strong performance, they become a major burden when the economy turns downward.

The retirement-age issue must also be examined in terms of both cost and productivity. To reduce income gaps for older workers and make use of experienced personnel, there is a need to expand continued employment. But if the seniority-based wage system remains unchanged while only the retirement age is uniformly extended, labor costs are likely to rise sharply.

After retirement age, it should be possible to adjust duties, wages, and working hours with rehiring at the center. The wage peak system, too, should be redesigned to reflect actual changes in work, responsibility, and productivity, rather than uniformly reducing wages based solely on age.

Companies, too, cannot escape responsibility. If management repeatedly accepts union demands simply to avoid production disruptions caused by strikes, the standards for determining wages and employment will be shaken. Taking on long-term burdens just to end an immediate conflict can hardly be regarded as responsible management. The better a company’s financial position is, the more carefully it must examine costs. Management must consider whether a settlement that looks expedient now may later return as a burden too heavy to bear.

The external environment surrounding Hyundai Motor is becoming increasingly fierce. Electric vehicles, autonomous driving, artificial intelligence, and robotics are reshaping the automobile industry. To respond to these changes, research and development and facility investment cannot be halted. If fixed costs continue to swell without improvements in productivity, investment capacity will shrink and the competitiveness of domestic production will also decline.

The further labor-management relations stray from principle, the more the price is paid in weakened corporate competitiveness. If a company cannot grow, it cannot expand investment and employment, and high wages will also become difficult to sustain. The union must recognize that the company’s growth is the foundation of stable jobs.

Companies as well must not become so preoccupied with ending strikes that they abandon management principles. Hyundai Motor’s labor and management have a shared responsibility to look beyond an immediate settlement and preserve the foundation that will allow continued investment and employment in the future.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 경영 원칙 벗어난 노사 합의, 기업경쟁력 갉아먹는다

Author: Sung-no Choi

Date: 2026-08-31

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=1&idx=29469