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Workers block an Ioniq 5 test vehicle from entering Hyundai Motor’s No. 1 factory in Ulsan on Jan. 31. (photo submitted by reader)

At 12:30 pm on Jan. 20, operations came to a sudden halt at Hyundai Motor’s No. 1 factory in Ulsan, which had been producing an Ioniq 5 test vehicle.

Workers had blocked the chassis from being brought in. Their reasons for doing so had to do with outsourcing key EV components.

The Hyundai Motor Group has finalized plans for its EV production to center on Hyundai Mobis rather than Hyundai/Kia. The pilot effort for mass-producing the Ioniq 5 was a first step in that direction.

At the current rate, around half of car assembly factories are poised to vanish into history alongside the internal combustion engine vehicle (ICEV). The situation at the Ulsan factory offered a preview of the restructuring drama that awaits the automobile industry in the EV era.

Confronted with a fast-changing industry paradigm, businesses have been investing heavily in new industries, while also pushing harder than ever before to cut costs. The Hyundai Motor Group’s consistent dodging of a definitive answer to its union’s demands for employment security can be read along similar lines.

According to both Hyundai labor and management on Jan. 28, the group plans to have parts affiliates produce all power electronics (PE) modules for its Electric-Global Modular Platform (E-GMP) EVs. (The modules correspond to the powertrain in an ICEV.) The group’s dedicated EV platform, E-GMP is to be applied to all EVs starting with the Ioniq 5, which is scheduled to go on the market in March.

“With the E-GMP EV powertrain, we’re going in a direction where we’re cutting costs by putting other parties [outside the group] in competition with Hyundai Mobis,” a group official explained.

“Hyundai Motor and Kia aren’t options,” the official added.

The union now finds itself at a precipice. Around half of the current Hyundai Motor factory is devoted to vehicle assembly, and the other half mainly to producing ICEV powertrains. The latter in particular is destined to be downsized in the future as EVs come to account for an increasingly bigger portion of activities.

In collective bargaining last year, the union demanded PE module production volumes for EVs, but the company did not agree. Indeed, even the union leaders are leaning toward giving up the ghost.

“We were so focused on winning things like bonuses in our annual collective bargaining that we failed to prepare for this situation at all,” a member of the union’s leadership explained.

“Now it’s too late.”

In the meantime, Hyundai Motor has gone forward with what amounts to a restructuring push. It has been massively paring down its processes, eliminating a number of positions equivalent to the number of employees reaching retirement age each year.

Hyundai Motor Group officials take a photograph after an “eco-friendly future vehicle field visit” event at Hyundai Motor’s Ulsan factory on Oct. 30 of last year. From left: Hyundai Motor President Kong Young-woon, President/R&D Division Head Albert Biermann, chapter president Lee Sang-su, Chairman Chung Eui-sun, President/Co-CEO Ha Eon-Tae, President/Co-CEO Lee Won-hee, and Kia Motors President Song Ho-sung. (Hyundai Motor Group)

The company refers to this as “process improvements.” The “improvements” last year targeted a total of 1,572 employees in 1,041 processes. That’s a little more than the 1,436 employees who reached retirement age the same year. With 1,970 employee retiring this year, process positions are expected to be cut by 1,712.

Rather than taking on new hires, the company has relied on a seniority-based part-time system when it needs extra staff.

Under this system, employees can perform contract-based work for up to one year even after reaching retirement age. This was introduced in 2019 through an agreement with labor.

“This was a case of interests coinciding between the company, which wants to avoid hiring new people whenever possible, and older union members who hope to defer their retirement a little,” a union member explained.

Adding to the chaos is the fact that the restructuring is irreversible, taking place in conjunction with changes to the industry paradigm.

There are also signs of conflict between labor and management on the horizon. The recent clash at the Ulsan No. 1 factory was one example.

A union member who was there at the time explained, “They’ve made a lot of concessions, and they’re saying that if [the company] can’t give them EV powertrains, it should at least give them the front chassis module, which integrates the PE module with the suspension.”

“That’s why production was halted on the Ioniq 5.”

The company has refused to bend. Recently, it has shied away from even discussing the full employment guarantees the union is demanding. The feeling is that they have the potential to be construed as “guaranteed employment” rather than guarantees concerning the retirement age.

In an October 2020 meeting with Hyundai Motor Group Chairman Chung Eui-sun, union leaders asked him to “have faith in the total employment security agreement.” Hyundai Motor quoted Chung as replying that “labor and management will need to work together to ensure employment insecurity does not arise.”

For this reason, plans to greatly reduce Hyundai and Kia’s production volumes — which make up a large proportion of regular production positions — appear very likely to enter full swing shortly.

If things proceed according to the current plan for keeping the number of new hires at basically zero, only around 40% of the company’s production positions will remain by 2030. That also spells the end of the road for the Hyundai Motor union — once South Korea’s largest, with 50,000 members.

Members of the Hyundai Motor employment security committee have voiced some skepticism. Since 2019, the committee has been developing plans for reassigning production positions in preparation for the future vehicle era.

“It is problematic that they’re having trouble coming up with a realistic reassignment plan, but the bigger issue lies elsewhere,” said one advisory committee member.

“At heart, this is a matter that will require a decision by the group’s head, but there’s a strong sense that the head office is looking at [the employment security committee meeting] as just a formality, and that they’d like to resolve things the way they are,” the committee member added.

The downsizing of Hyundai Motor’s factories is very likely to be repeated, with some variations, across the automobile industry. The enormous investments required for future vehicles translate into a growing incentive to cut down on ICEV production costs.

This year, Hyundai Motor’s cost-cutting committee formulated a plan for slashing a total of 41 trillion won in costs between 2018 and 2025. Both the time frame and amount have increased from the original target of 34.5 trillion won between 2018 and 2022.

“Both labor and management need to stop focusing solely on short-term interests and think about what sorts of jobs the automobile industry is going to offer future generations,” another advisory committee member said.

By Lee Jae-yeon, staff reporter

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