No raise, then strike! Hyundai Heavy Industries is overwhelmed with orders but can't smile.

Due to failure to meet the union's salary expectations, the latest round of labor-management negotiations at Hyundai Heavy Industries in South Korea has broken down, and the unions at its three shipyards will hold a joint strike for the first time. This global shipbuilding giant, which has seen a surge in orders this year, will face further risks of labor shortages and project delays.

On November 30, union workers at Hyundai Heavy Industries, Hyundai Mipo Dockyard, and Hyundai Samho Heavy Industries, all subsidiaries of Hyundai Heavy Industries Group, announced a strike. Workers at the three shipyards will stage a 4-hour and a 7-hour strike on December 6 and 7 respectively, followed by an indefinite strike starting December 13.

This is the first time that the unions at the three shipyards of Hyundai Heavy Industries Group have launched a joint strike. Disagreements over wages and benefits have been long-standing. Since July this year, the two sides have held dozens of collective bargaining sessions, but have yet to reach an agreement on the wage increase. The union is demanding a 142,300 won (approximately 772.07 RMB) increase in base salary this year, a performance bonus of over 250%, improved medical benefits, increased educational expenses for employees' children, and changes to the salary structure.

Hyundai Heavy Industries Group's management rejected the union's demands, saying it would increase the annual cost of the three shipyards by over 250 billion won (approximately 1.356 billion RMB).

On October 14 this year, the unions at the three shipyards of Hyundai Heavy Industries Group applied to the Korea Central Labor Relations Commission for mediation of the labor dispute. On October 21, the commission decided to terminate the mediation, granting the union the legal right to strike. The unions at the three shipyards subsequently held separate votes, and union members voted in favor of strike action. However, at the time, South Korean industry insiders predicted that the union was unlikely to strike immediately.

A month later, on November 22, the unions at the three shipyards stated that if management did not put forward a forward-looking proposal regarding wages and collective bargaining agreements, they would hold a joint comprehensive strike in December. The union stated: "We have no choice but to fight to correct the distorted wage structure system (including low wages and long working hours) and restore wages that were cut during the industry downturn."

A union official pointed out: "Management has not improved the distorted wage structure and insists on a strategy of strengthening employment flexibility by expanding the recruitment of foreign workers. This year's wage and collective bargaining is also meaningful for the normalization of the poor wage levels in the entire shipbuilding industry."

In the 33rd round of collective bargaining held on November 25, Hyundai Heavy Industries Group's management proposed an increase of 80,000 won (approximately 434.05 RMB) in base salary next year, a bonus increase of 3 million won (approximately 16,300 RMB), and also proposed expanding regular employment for retired production technicians, providing retired personnel with up to two additional years of work, paying 500,000 won annually for dental treatment, and extending the repayment period for housing loans to 15 years.

Hyundai Heavy Industries Group executives said: "The total increase in base salary from 2020 to 2022 reached 194,000 won (approximately 1,052.58 RMB), which is much higher than other companies in the same industry. Although we achieved profitability in the third quarter of this year, the outlook for 2023 is uncertain, and new ship orders are expected to decline by 40% next year. With profit recovery slower than expected, management has put forward the best plan it can. The company had a deficit of about 800 billion won last year, and may also have a considerable deficit this year."

       However, the last-minute proposal from management was still not accepted by the union, which rejected the latest agreement on the grounds that it did not meet expectations. On November 30, 300 members of the three shipyards' unions held a 7-hour strike in front of Hyundai Heavy Industries Group's global R&D center in Banghwa, Gyeonggi-do.

South Korean shipbuilding industry insiders say that shipyards currently have a large workload but face pressure to improve efficiency and output to keep up with delivery schedules. Therefore, if the union goes on strike, the further shortage of labor will have a considerable impact.

Since the beginning of this year, the order volume of Korea Shipbuilding & Offshore Engineering (KSOE), the shipbuilding business holding company of Hyundai Heavy Industries Group, has reached 190 vessels worth US$22.82 billion, reaching 130.8% of its annual target of US$17.44 billion. This not only exceeded last year's full-year total of US$22.8 billion but also set a new record for annual order intake since 2013.

With the rapid increase in backlog orders, Hyundai Heavy Industries Group restarted its largest shipyard, Gunsan Shipyard, on October 28. At the same time, to alleviate the labor shortage, Hyundai Heavy Industries Group has relaxed visa restrictions and will introduce about 550 skilled foreign workers, including welders from Thailand and Indonesia. The number of foreign subcontracted workers will also increase from 800 in the first half of this year to 2,000.

It is understood that in June this year, subcontracted workers at Daewoo Shipbuilding held a 51-day strike, including a sit-in protest against three oil tankers under construction. They went on strike over wages and working conditions. The strike led to delays in shipyard construction and further deterioration of financial conditions, leading the Korea Development Bank to decide to push for the privatization of Daewoo Shipbuilding.
 
South Korean President Yoon Suk-yeol considered the strike at Daewoo Shipbuilding unacceptable. He ordered measures to end the strike, but the government did not directly intervene. It remains unclear how the government would handle the situation if the strike causes the three shipyards of Hyundai Heavy Industries Group to shut down.