Seoul: Hyundai Motor Co. and Kia Motors Corp. workers agreed to go on strike for a second straight year to demand higher wages.

More than 70% of Hyundai’s 45,000 guild members voted in favour of authorizing union leader Moon Yong Moon to call for a walkout at the company, Kim Gi Hyuk, a union spokesman, said in a text message on Wednesday. Workers at Hyundai’s affiliate Kia also voted in favour of a strike plan on Tuesday. The strike may begin as soon as 30 August, Kim said earlier.

While Hyundai is used to stoppages—workers have gone on strike in 22 of the past 26 years—the walkouts loom as the weaker yen gives Japanese automakers an edge to cut prices or offer incentives on their cars. Seoul-based Hyundai’s net income has fallen for three straight quarters, while analysts estimate Toyota Motor Corp. is headed for a record annual profit.

“If the union does walk out as planned, it will lead to a worse-than-expected third-quarter profit," Lee Sang Hyun, an analyst at NH Investment & Securities Co., said by phone before the voting results were announced. Still, “it’s unlikely the strikes would go on for long as the union won’t risk giving up their bonuses, which are given only when workers meet production targets."

Hyundai and Kia’s labour unions have said they’re demanding a pay increase of 130,498 won ($117) a month and for 30% of net income to be distributed to workers. The talks started on 28 May for Hyundai and 2 July for Kia.

Costly Strikes

Hyundai’s union will hold a meeting on 19 August to set out the specific strike schedule, spokesman Kim said by phone on Tuesday. This year’s strikes, which may begin as early as 20 August, are unlikely to lead to full stoppages of all plants in the country like last year, as the union is considering having a rotating schedule among each of the plants, Kim said.

Stalled wage talks at Hyundai last year led to the costliest strike in its history, causing a production shortfall of 82,088 vehicles and an estimated 1.7 trillion won in lost sales.

Hyundai climbed 2.6% to 233,000 won at the close in Seoul trading on Wednesday. Kia rose 1.3%. The benchmark Kospi index advanced 0.6%.

Hyundai sent a letter to the union on Tuesday requesting that the talks resume, according to an emailed statement.

Militant Unions

The vote at Hyundai, which has the nation’s biggest workers’ guild, signals the resurgent militancy of South Korean labour unions as unemployment rises and employers shift production overseas. Past Hyundai union protests have led to clashes between police and militant unionists armed with steel pipes and Molotov cocktails.

The number of South Korean work days lost on labour disputes more than doubled to 933 days last year from 429 in 2011, according to data compiled by the nation’s ministry of employment and labour. In 1993, the Bank of Korea cited protracted labour strife at Hyundai as a key reason for its decision to lower its gross national product estimate.

Prior to 2008, the union went on strike every year except one, costing what Hyundai estimates to be more than 1 million vehicles valued at 11.6 trillion won in lost sales.

US Incentives

Moon Yong Moon was elected as Hyundai’s union leader in 2011 after pledging to be a tougher negotiator than his predecessor, Lee Kyung Hoon, who was elected to a two-year term in 2009 after pledging to curb unnecessary strikes.

Moon’s activism in past protests led him to be arrested four times and laid off by the company three times since he joined Hyundai’s union in 1988.

The won has gained 26% against the yen in the past year, curbing Kia and Hyundai’s competitiveness against Japanese automakers, which are also big exporters to the US.

Hyundai’s incentives in the US surged 47% through July from a year earlier. That compares with a 1.7% decline in Toyota’s incentives and the market average of a 2.4% increase, according to Autodata Corp.

Hyundai’s sales rose 2% in the US market through July, trailing the industry’s 8.5% growth. Its deliveries slumped 7.2% in Europe in the April to June quarter.

Kia spent 7.6% more per vehicle on incentives in the US this year, while sales fell 3.1%, according to Autodata. Bloomberg

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