Hyundai Motor's (005380.KS) wage negotiations have entered their final stage. With management taking a hard line amid deteriorating business conditions and a 30% plunge in first-quarter operating profit, the talks are heading toward conflict.
At the 14th round of negotiations held at the Ulsan plant Wednesday, Hyundai Motor proposed an additional wage package of an 84,000 won increase in base pay, performance bonuses of 350% plus 9.5 million won, and 12 shares of stock. While improved from the first proposal presented Sunday (79,000 won in base pay, a 9 million won performance bonus, and 10 shares), it still falls far short of the union's demand for a 149,600 won base pay increase.
Lee Jong-cheol, chairman of the Hyundai Motor branch of the Korean Metal Workers' Union, stressed that the offer was "a level union members cannot accept," adding, "Thursday's negotiations will be the last chance."
Behind the prolonged labor-management conflict is Hyundai Motor's worsening business performance. First-quarter operating profit was 2.5147 trillion won, down 30.8% from a year earlier. The impact of U.S. tariffs alone reached 860 billion won. A 270 billion won loss from a surge in the period-end exchange rate and a 300 billion won increase in incentives also eroded profitability. Annual operating profit for 2025 has fallen 19.5% to 11.4679 trillion won.
The company's operating margin target for this year, set at 6.3% to 7.3%, also reflects this. Representing a slight improvement from the 6.2% operating margin in 2025, it is expected to be difficult to recover the margins of more than 8% seen in the past.
Under these circumstances, accepting the union's wage increase demand is not easy for the company. CEO Choi Young-il said he would "review overall costs from scratch," a remark that even suggests the possibility of restructuring.
The union has cited "the company's high profitability" as the reason for its demand for a 149,600 won base pay increase. Indeed, 2024 operating profit was 14.2396 trillion won, still a considerable figure. If the first-quarter difficulties are seen as temporary, the calculation is that the company can sufficiently manage it on an annual basis.
The problem is the uncertainty of the outlook ahead. Securities firms forecast Hyundai Motor's annual operating profit for 2026 at 11.2 trillion to 13.2 trillion won, but there are many variables. It is unclear how long the U.S. tariff structure will persist, and a slowdown in the Middle East and global demand are also concerns.
The outcome of the wage negotiations is directly tied to Hyundai Motor's management. If a strike actually breaks out, it could cause major disruptions to production and delivery schedules. Having already been hit once by a strike last year, another strike this year would inevitably weaken global competitiveness. The union is likely well aware of the impact of "two consecutive years of strikes."
Hyundai Motor views 2026 as "the start of profitability normalization and future investment." It plans to invest 7.4 trillion won in R&D and 9 trillion won in capital expenditure going forward. The strategy is to secure future growth engines such as autonomous driving, AI technology, and the robotics business.
Boston Dynamics' Atlas is expected to enter mass-production preparations around 2028. Considering such investment capacity as well, the key question is what level of concessions is possible in the wage negotiations.
Analysts stress the importance of Thursday's negotiations. Securities firms' assessment that "there is 20% to 40% upside from the current stock price" also reflects Hyundai Motor's future growth potential.
However, resolving labor-management conflict and stabilizing management are essential for that. Whether a wage settlement and subsequent management normalization will lead to a re-rating of Hyundai Motor's stock, or whether a strike will shake its future competitiveness, depends on the next four days of negotiations.
