Insight: In South Korea's struggling Kia Town, "bad jobs" better than no jobs

Shinil Electronics Co

16/04/2019 24:00

* Gwangju hit by manufacturing losses, Kia among handful of
big
firms left
    * Gwangju poorest major city in S.Korea as Kia output
plunges
    * City teams up with Hyundai to build a low-cost car JV
    * JV offers half the wage of Hyundai workers, with housing,
benefits  
    * Auto unions worry about 'bad jobs', but young job seekers
keen

    By Hyunjoo Jin
    GWANGJU, South Korea, April 16 (Reuters) - Park Byung-kyu
once led Kia Motor's union in the city of Gwangju, fighting for
labour protections against the powerful, family-run chaebol that
dominated the economy during South Korea's rapid
industrialisation.
    But about 20 years ago, Park was assaulted by unionised
workers wielding steel clubs after he campaigned for the rights
of temporary workers at another company, leaving him paralyzed
on the right side of his body. 
    The attack also left him disillusioned with the approach of
South Korea's forceful and often militant unions, which have
faced increasing criticism for protecting their interests at the
expense of other workers.
    Now, Park is working for the city of Gwangju on a proposed
joint venture with Hyundai Motor Co  005380.KS  to build a new
low-wage car factory, Hyundai's first new factory in South Korea
in 25 years. 
    The $616 million plant would create 1,000 jobs, but at less
than half the wages of Hyundai's unionised workers and without
many of the privileges they currently enjoy.  urn:newsml:reuters.com:*:nL3N1ZU2PS
    "The labor unions with vested interests should change. If
not, their interests will be taken away," said the 53-year-old
Park. "Unionised labour should face up to the reality."
    The unions of Hyundai and affiliate Kia Motors  000270.KS ,
which together form the world's fifth-largest automaker by
volume, have staged strikes and rallies to protest the plant.
    They say it will create "bad jobs" and take away production
and employment from existing factories.
    But in a city that has seen a steady exodus of manufacturing
jobs move to low-cost countries, many job seekers say they would
work for the plant in a heartbeat.
    Employment is a key focus for President Moon Jae-in's
administration as Asia's fourth-largest economy struggles to
create jobs in the face of a slowing China economy, U.S. trade
protectionism and increased minimum wages.
    The Moon government plans to provide financial assistance to
the Gwangju plant, and also introduce similar
government-business ventures in two other cities by June. 
    Officials hope it will lead to a “U-turn” of Korean
companies which would otherwise build factories overseas.
    "This is a bold experiment to resolve jobs and labour
relations problems," said Park Myung-joon, a senior research
fellow at state-funded Korea Labour Institute, who has been
involved in the project since its beginning in 2014.
    The carmaking venture, the first of its kind in South Korea,
is the biggest threat to date for legacy unionised auto workers,
who have largely maintained high wages and benefits even with
youth unemployment near a record high and the economy sluggish,
Park said.
    "The expensive union jobs will gradually disappear."
    
    POOR CITY
    The proposed Hyundai factory will offer annual wages of 35
million won ($31,492) - just over a third of the average 92
million won that existing Hyundai workers earn, but higher than
the average 33 million won salaried workers make in Gwangju.
    Home to Kia Motor's largest domestic production facility,
Gwangju is South Korea's No.2 motor city after the southeastern
city of Ulsan, generating over 40 percent of its manufacturing
output from the auto sector.
    Like Ulsan, which has declined as Hyundai production has
retreated, Gwangju's fortunes have waned as Kia's output fell to
its lowest level in eight years last year.  urn:newsml:reuters.com:*:nL4N1UX0CA
    Gwangju is now South Korea's second-poorest metropolitan
city, with average monthly wages some 13 percent below the
nationwide average in 2017, according to labour ministry data. 
    Kim Jae-seung, who studied business management in college,
said he is willing to apply for a blue-collar job at the planned
plant.
    "Its wage is still above the average worker's wage. In that
sense, it is not a bad job. It is a good job," the 32-year-old
Kim said at a recent job fair held at the city hall. 
    Other job seekers in Gwangju interviewed by Reuters said
they too were interested given high levels of unemployment among
the city's younger workers. 
    "There are not many quality jobs out there. Given the
current economic situation, I will be thankful for the 35
million won wage," said Goh Chang-hoon, a 27-year-old law major.
        
    DEFUNCT GERMAN MODEL
    Park, the former union leader, first proposed the low-wage
factory in 2014 and later took a leave of absence from Kia to
work full-time for the city government.
    Park said he borrowed the idea from Volkswagen's now-defunct
low-cost division Auto 5000, which was created in 2001 to keep
jobs from moving out of Germany. The project came to end in
2009, after the automaker won wage concessions from its powerful
and highly paid legacy workers.
    The new factory would have an annual capacity of 100,000
mini, gasoline-powered SUVs starting 2021.
    Gwangju also hopes to make electric vehicles at the plant in
the future, although it has yet to be agreed with Hyundai.
    James P. Rooney, an international finance professor at
Sogang University in Seoul, said to be successful, the plant
should make electric cars. 
    “The joint venture shouldn’t be thought of a place of
getting away from union and high labour cost. It should be based
on the product of the future, not product of the past."
    Hyundai said it has decided to participate in the project,
because the city, local community and the joint venture pledged
to "build collaborative labour relations and maintain proper
wage levels".
    "Under such conditions, we believed that we would be able to
secure competitiveness when we outsource mini-vehicle production
to the newly created corporation," Hyundai said in a statement
to Reuters. 
    Kim Yong-gu, chief executive of Hyundai Hitech, a
Gwangju-based parts supplier for Kia, is hoping the new Hyundai
factory will help make up for reduced output at Kia.
    Kia's Gwangju plant produced 455,252 vehicles last year,
well short of its production capacity of 620,000.
    “Kia can’t make the car with current labour costs," Kim
said.
    In addition to lower wages, the joint venture will break
away from the union's tradition of striking almost every year
during annual wage talks.
    South Korea’s reputation for militant unions and rigid labor
practices has long been cited as contributing to high labor
costs and a persistent discount for corporate Korea.     
    To make up for lower pay, Gwangju plans to build 1,100 homes
as well as daycare and gym facilities in the factory complex,
with the central government's help.  
     
    WHITE ELEPHANT? 
    The plan is not without its critics, who question the wisdom
of adding another plant at a time when automakers are grappling
with excess capacity amid sluggish domestic demand, falling
exports to the United States and weak sales in China.
    Auto production in South Korea is expected to fall to 3.65
million vehicles this year, just three quarters of total
capacity of 4.66 million vehicles, auto unions say.
    They also argue the project is politically motivated, with
Gwangju long a political stronghold of Moon's liberal
government.
    “We have been agonizing over how to create jobs at a time
when low growth and low employment have become structural
issues," Jung Tae-ho, the presidential job secretary, said at a
recent briefing.
    “The project will be key to revitalising the struggling
local economy." 
    Local officials acknowledge the plan is not the panacea to
all the problems Korea's manufacturing industry faces, but say
it can show one path forward.
    "This is not just about creating jobs in Gwangju, but about
addressing Korean Inc's structural problems of low growth, low
employment and high cost," Gwangju Mayor Lee Yong-sup told
Reuters. "Korea Inc needs a breakthrough.”
    ($1 = 1,136.5400 won)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Young people struggle in S.Korea's Kia Town    https://tmsnrt.rs/2X2FuR7
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Hyunjoo Jin; Additional reporting by Edward
Taylor in FRANKFURT; Editing by Soyoung Kim and Lincoln Feast.)
 ((hyunjoo.jin@thomsonreuters.com; 82-2-3704-5685; Reuters
Messaging: hyunjoo.jin.thomsonreuters.com@reuters.net))