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Friday, August 14, 1998 Published at 13:19 GMT 14:19 UK

Business: The Company File

Strikes close Hyundai

Korea's workers have not taken to management's restructuring plans

Striking workers have succeeded in closing indefinitely Korea's largest automaker.

The bitter strike - over the issue of compulsory redundancies - demonstrates just how difficult the reform process still is in Korea.

Hyundai Motors said on Friday that it will close indefinitely its car factories in the southern industrial city of Ulsan after striking workers barricaded themselves in the plants in defiance of a police raid.

The workers are angry at plans to lay off 1,600 people who were fired on July 31.

Sales hit

The company says it needs to make redundancies because of the sharp drop in domestic demand for its cars in Korea.

Overall Hynundai's sales were down by 20% in the first half of the year as the company made a loss of 1.2bn won ($864,000) on sales of 4.2 trillion won ($3 bn). It has been operating at only 40% of its capacity of 1.25 million cars per year.

Analysts are expecting the strike, which has been going on since July 20, will hit second half earnings even harder.

Violence at plants

[ image: Militancy is up as well as the jobless rate]
Militancy is up as well as the jobless rate
On Monday and Tuesday managers attempted to reopen the plants, leading to violence and at least 28 injuries. The company said that the executive managing director was among those hurt.

On Wednesday the company made a last ditch attempt to settle the dispute by offering to take back 60% of the fired workers and put them on two-years unpaid leave, while extending its offer of voluntary redundancies.

But the union rejected the plan after proposing its own scheme for worksharing and reductions in hours which it said would save the company $192m a year.

"We are not fools. The offer means the company will cut the wages as well as sack workers," said union official Kim Kwon-soo.

The company said it had no choice but to shut the factories.

"We have done our best to reduce the number of workers to be laid off...but the union refuses to make any compromises and continues to insist on no layoffs," a spokesman said.

Reforms still difficult

Hyundai, the second largest chaebol, or conglomerate, in Korea, is the first to try to implement the new labour law that was introduced in February to make it easier to sack workers.

Since the economic crisis began in Korea, the jobless rate has soared to a 20 year high of 7%, up from 4.5% in January.

But companies say that restructuring and further layoffs are the only way to restore their competitiveness.

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