Academic journal article The Economic and Labour Relations Review : ELRR

Employment Relations in the Korean Automotive Industry: Issues and Policy Implications

Academic journal article The Economic and Labour Relations Review : ELRR

Employment Relations in the Korean Automotive Industry: Issues and Policy Implications

Article excerpt

Korean auto manufacturers, have experienced rapid growth over the past two decades and are now at a crossroads. One direction leads to greater international competitiveness and success; the other leads to stagnation and decline. There are several critical issues facing the Korean auto industry: the demand for new cars in the domestic market is declining, there will soon be a new Korean car maker into the market, and the complete opening of the domestic market to the overseas auto companies will increase competition not only among domestic auto companies but also with overseas firms. As Korean auto makers lose their low cost competitiveness, it is anticipated that they will also face tougher competition in international markets

With rapid changes in the industrial relations environment in Korea, since 1987, the auto industry has experienced several serious labour disputes. Industrial relations practices in the auto industry have not yet stabilised and the industry faces additional changes effected by globalization. Moreover, given the Korean auto industry has the largest union membership among private manufacturing companies in Korea, employment relations in the auto industry will have a strong influence on the future direction of Korea's industrial relations as a whole.

This paper analyzes employment relations in the Korean auto industry through an examination of three major auto companies: Hyundai, Kia, and Daewoo Motors. Policies are suggested for innovation in employment relations in the Korean auto industry. Only production workers are considered for the analysis since non-production workers in these three companies do not belong to unions.

The analytic structure for the research is shown in Figure 1. Considering the fact that collective bargaining in Korea is mainly conducted at enterprise level, this paper focuses on the inter-relationship of industrial relations activities at company/plant/workplace levels and human resource management practices. As the size of the three auto makers is large, industrial relations activities at company level and those at plant level are distinguished from each other. It is assumed that the human resource management practices in each company are strongly influenced by the power balance between labour and management, relations among labour groups in the union, and the process of dispute settlement at company, plant and workplace levels.

The main focus of this paper is the degree of change in industrial relations, and in four major areas of human resource management, since the early 1990s. Business environments of the companies, the governance structure among labour, management and government at the national level, and labour market conditions are seen as factors influencing industrial relations and human resource management practices.


This paper is based on a series of interviews with pol icy decision-makers from both unions and management in the three auto makers which were conducted between December 1996 to March 1997. Secondary data on recent industrial relations in the Korean auto industry are also used in this paper.

The External Environment

The annual sales of Korean vehicles exceeded two million units in 1996. This represented ten fold increase from the annual sales of two hundred thousand vehicles in 1987. However, the future market forecasts for the Korean auto industry do not appear to be as positive.

The domestic market, which experienced rapid expansion until recent years mainly due to rapid improvement in Korea's national income level, has stagnated. The annual demand peaked at 1,110,000 units of vehicles in 1996. However, from 1997, the volume of the annual demand in the domestic market is expected to decrease steadily to 600,000 units of vehicles by the year 2000 (Kia Economic Research Centre, 1994).

Moreover, while the existing companies have continuously expanded their production facilities, a newcomer, Samsung Motors, will start to produce passenger cars for the domestic market, from 1998, with a production capacity of 500,000 unit of vehicles per year. …

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