Hyundai Motor seeks to cut Ulsan transmission output by 45%, sparking labor dispute

Transmission production target to fall from 360,000 to 200,000 units

Output to shift to affiliate Hyundai Transys instead of in-house production

Combustion-engine parts output to fall as Ulsan plant accelerates eco-friendly vehicle shift

Union opposes outsourcing of 'prime' production lines

Labor tensions rise over work allocation after bonus and AI disputes

Workers at Hyundai Motor's Ulsan Plant 1 conduct a final quality inspection on the Ioniq 5. [Provided by Hyundai Motor Group]

Hyundai Motor is pushing to reduce transmission production at its Ulsan plant, aiming to shift some combustion-engine transmission output — where sales have slowed — to an affiliate, while refocusing the plant on building out a mass-production system centered on hybrid and electric vehicles. The union is pushing back hard, warning that work draining to affiliates could fuel long-term job insecurity, and the dispute over outsourcing is emerging as a fresh flashpoint in labor-management relations.

According to industry sources and the union, Hyundai Motor is discussing at its employment stability committee a plan to cut transmission output handled by the Ulsan plant's engine and transmission division by roughly 45 percent, from 360,000 units to around 200,000. The company would wind down some lines that produce combustion-engine transmissions and adjust overall production capacity accordingly.

Management says it needs to outsource some in-house production of combustion-engine transmissions for models where sales have slowed, and to improve production efficiency to meet rising demand for hybrid vehicles. Two pressures are converging: a dedicated electric vehicle factory completed at the end of last year is set to begin full operation in September, and demand for hybrid models — including the new Grandeur produced at the Asan plant — is growing, making it necessary to reallocate related transmission output.

Hyundai Motor took a similar step in 2024, when it ended domestic production of the Kappa engine — a small gasoline unit used in models such as the Venue and Casper — and transferred that output to affiliate Hyundai Wia and other suppliers.

A diagram of the next-generation hybrid drive system TMED-II applied to the Hyundai Palisade Hybrid. TMED-II features both P1 and P2 motors to deliver improved performance and fuel efficiency. [Provided by Hyundai Motor Group]

'Prime lines walking out the door' — union pushes back as Hyundai Transys set to expand

The union has responded sharply, saying the plan amounts to gutting the plant's best machining lines and slashing production capacity in half. Some workers have gone as far as refusing overtime on certain lines.

At the heart of the dispute is who picks up the work that the Ulsan plant gives up. According to industry sources, Hyundai Motor is considering expanding production at group parts affiliate Hyundai Transys to 400,000 units to absorb the volume it no longer makes in-house.

Hyundai Transys has in fact been scaling up its hybrid-related capacity to keep pace with rising demand. Late last year, management and the union at Hyundai Transys agreed to build a new line to increase production of front-wheel-drive P1 motors as part of the company's electrification transition. The new line is planned for the Seongnyeon factory in Seosan, South Chungcheong Province.

Palisade transmission work offered as sweetener

To ease union resistance, Hyundai Motor is reportedly in talks to allocate a portion of TMED-II transmission output for the Palisade Hybrid — its flagship SUV with steady demand — to the Ulsan engine and transmission division. The company is expected to tell the union that the new Tucson and Genesis GV80 Hybrid, both due for release in the second half of this year, will also use TMED-II, meaning the Ulsan division could secure a meaningful share of future work.

TMED-II is Hyundai Motor Group's next-generation hybrid system. Unlike the single-motor TMED-I it replaces, TMED-II pairs P1 and P2 motors to boost both performance and fuel efficiency. It debuted on the Palisade in January last year and was also fitted to the new Grandeur launched last month.

At present, all TMED-II units for the Palisade Hybrid are produced at Hyundai Transys's Seosan factory and supplied to Hyundai Motor. Hybrid drivetrain components are considered a high-value product category, given their technical complexity and rapidly growing demand. Riding that wave, Hyundai Transys posted sales of 14.8 trillion won (about $9.72 billion) last year, up 16.5 percent from the prior year, while operating profit surged 327 percent to 336 billion won — both records since the company's founding. In the first quarter of this year, sales rose 5 percent year-on-year to 3.8072 trillion won.

Hybrid market grows — and so does the fight over future work

The union's sensitivity stems from its view that the transmission volume adjustment is not simply a matter of production efficiency but is directly tied to future employment. With the shift to electric vehicles moving more slowly than expected, hybrids — including their transmissions and drivetrain components — have become a key profit driver for automakers.

Hyundai Motor sold 637,000 hybrid vehicles in global markets last year, and that figure is forecast to climb to around 771,000 this year — roughly 21 percent of the company's total projected sales of about 4.15 million vehicles. With domestic hybrid production alone expected to reach around 430,000 units this year, the contest over who makes the related components is likely to intensify further.

The Hyundai Motor union has raised the issue of in-house transmission production before. When partial strikes at Hyundai Transys caused supply disruptions in both 2022 and 2024, the union argued that Hyundai Motor needed to produce transmissions itself.

"Transmissions we make with our own hands should be going into the Palisade too," a union official said. "Instead, production is being expanded outside, and even the work we have left is being pushed out the door."

"Hybrids have become the key model defending automakers' profitability amid the electric vehicle demand slump," an industry official said. "As Hyundai Motor expands overseas production, the move to concentrate parts output at affiliates is compounding the sense of crisis on the domestic factory floor."

kwater@heraldcorp.com