LABOR STRIKE SEASON IN KOREA: WINDS OF CHANGE?

UNCLAS SEOUL 002596

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ELAB ECON ETRD PGOV KS
SUBJECT: LABOR STRIKE SEASON IN KOREA: WINDS OF CHANGE?


SUMMARY
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1. (U) As part of an annual ritual, labor unions throughout
Korea are pressing their employers for concessions. Strikes
and threats of strikes are affecting many key areas of
industry ranging from the largest steel manufacturer (POSCO)
to the Korean Stock Exchange (KRX). Although these strikes
are not a new phenomenon, they draw greater international
attention in light of the ongoing KORUS FTA negotiations and
because of Korea's desire to portray itself as fertile ground
for foreign investment. This cable provides an overview of
the more prominent labor actions in the weeks leading up to
the annual summer vacation, noting that strike activity
appears to be on the decline. END SUMMARY.

HYUNDAI MOTORS
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2. (U) Beginning on June 26 as a work slow-down initiative,
unionized workers at Hyundai Motor stopped working for as
many as 6 hours a day, demanding a 9.1 percent pay increase
and better working conditions. After a month of failed
negotiations, representatives from the two sides reached a
last-hour deal on the eve of the summer vacation season and
with the threat of a full-scale strike looming. Most
estimates place Hyundai's losses as a result of the work
slow-down and loss of exports in the range of 1.3 billion
dollars. (NOTE: In past years, workers have worked
additional hours before and after strikes to make up for lost
production thereby avoiding long-term impacts on sales and
production. END NOTE.) The Financial Times noted that labor
unrest has been cited as one of the biggest issues preventing
Hyundai from joining the ranks of top global carmakers. This
year's strike marks the 12th straight year of strikes for the
company.

POSCO
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3. (U) Located in Pohang, North Kyongsang Province, POSCO is
Korea's largest steel manufacturer and the 4th largest
producer in the world. On July 13, approximately 2,000
construction workers occupied POSCO's headquarters after
negotiations with POSCO's subcontracting companies failed to
yield desired concessions. The workers refused to negotiate
directly with the Pohang Construction Companies, the direct
employer of the workers, citing complex subcontracting
policies that limit POSCO's involvement and responsibility
for the working-level employees.


4. (U) Given that there is not a direct connection between
the construction workers and POSCO, President Roh deemed the
occupation illegal and threatened to use force to remove the
occupants. In light of the aftermath of a similar "illegal
strike" by the Korea Rail Workers Union where the union was
fined an estimated 2.4 million dollars, workers decided to
depart the POSCO headquarters without further clashes with
police.

STICKS TO CARROTS
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5. (U) In addition to Hyundai Motors and POSCO, the Korean
Stock Exchange (KRX) and Kia Motors have also faced labor
strikes in recent weeks. Noticeably absent from the list of
striking unions is Hyundai Heavy Industries which has avoided
strikes for the 12th straight year. Using carrots rather
than sticks has allowed Hyundai Heavy Industries to keep
employees happy and keep production going. In a press
statement on July 25, Labor Minister Lee Sang-soo said in
reference to the age-old practice of striking to gain more
power, "This is a culture we should overcome." Reports also
indicate that workers at both Hyundai Heavy Industries and
Hyundai Motors both received comparable compensation packages
with the difference being the high price of lost production
that Hyundai Motors paid to reach the same result as its
brother company.

OUTLOOK
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6. (U) Although studies by the Korea Labor Institute show
the days lost to labor unrest are on the decline (from 144
lost days per 1000 wage workers in 2000 to 81 days in 2004),
foreign investors and experts still consider Korea as having
some of the world's most hostile workers. As Korea continues
to strive for greater globalization, they are more sensitive
to how their markets are perceived by the outside world.


7. (U) Labor unions at major automakers and steelmakers
recently voted to combine under a single industrial union to
carry more weight into bargaining and striking situations;
further strengthening the position of labor unions. Starting
in 2007, more than one labor union will be allowed in each
workplace thereby increasing the potential for employers to
face strikes on multiple fronts in next summer's wage
negotiation season.

COMMENT
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8. (U) The two largest trade unions in Korea, the Korean
Confederation of Trade Unions (KCTU) and the Federation of
Korean Trade Unions (FKTU) are diverging in their tactics as
well. While KCTU sticks to hard-line measures, FKTU recently
signed an agreement to cooperate with the Korea Trade and
Investment Promotion Agency to help attract foreign
investment. Following the current season of labor struggles,
both unions will need to work hard to convince the public as
well as their own members that the costs of striking yield a
satisfactory outcome, since local businesses and communities
were also adversely affected by production stoppages.
YUN