Members of the Korean Metal Workers' Union hold placards and flags demanding direct negotiations with parent companies at a rally of 10,000 union officials near Gwanghwamun Square in Jongno-gu, Seoul, on June 10. [Yonhap]
Members of the Korean Metal Workers' Union hold placards and flags demanding direct negotiations with parent companies at a rally of 10,000 union officials near Gwanghwamun Square in Jongno-gu, Seoul, on June 10. [Yonhap]

South Korea's shipbuilding industry is bracing for a wave of labor action timed to coincide with workers' return from summer vacation. After breaking a prolonged slump and entering a full-blown boom, the sector now faces a widening standoff between unions demanding a share of the recovery and management intent on protecting profitability.

The union at HD Hyundai Heavy Industries — an affiliate of the Korean Metal Workers' Union — wrapped up its joint summer holiday Thursday and plans to file for labor mediation with the National Labor Relations Commission on Friday. The union and management have held 14 rounds of wage talks since negotiations opened in June without reaching an agreement. The union is seeking a monthly base-pay increase of 149,600 won ($106), separate from seniority raises, along with a bonus equivalent to 30 percent of last year's operating profit and additional performance pay — demands management has so far resisted.

The union argues that sustained profitability warrants fair compensation, while management contends that excessive wage increases would weigh on future competitiveness. If the commission orders mediation suspended and union members vote in favor of a strike, the union would gain the legal right to walk out.

Hanwha Ocean is also in the middle of wage and collective bargaining talks that have dragged on since last month without resolution. The company's union is seeking a flat-rate base-pay increase and revised performance bonus criteria. Hanwha Ocean faces labor pressure on multiple fronts: two subcontractor unions — the Geoje-Tongyeong-Goseong Shipbuilding Subcontractors branch of the Korean Metal Workers' Union under the Korean Confederation of Trade Unions, and the Welliv branch representing food-service and cleaning workers — received strike authorization against the parent company from the South Gyeongsang Province Regional Labor Relations Commission earlier last month.

Hanwha Ocean contested a National Labor Relations Commission ruling that recognized it as the employer of Welliv union workers, filing a lawsuit with the Seoul Administrative Court on July 20. The two subcontractor unions have signaled they will strike if management refuses to come to the bargaining table. Industry observers are watching closely, as the dispute could become the first substantive case in which a subcontractor union exercises the right to strike against a parent company under the revised Trade Union Act — commonly known as the "yellow envelope law" — which took effect this year.

Samsung Heavy Industries is also in wage talks with its workers' council following an initial meeting. Negotiations are centered on pay, and the same issues seen elsewhere in the industry — performance bonuses tied to the return to profit and the ongoing boom — are expected to emerge as key sticking points. With all three major shipbuilders facing potential labor-management friction, there are growing concerns about a prolonged dispute. "In the past, deals were usually wrapped up before the summer holiday," an official at one of the shipbuilders said. "This year, I'm not even sure we can get it done before Chuseok."

A strike would be particularly damaging given that each shipyard's order books are packed with more than three years' worth of work. Analysts warn that labor unrest could put second-half profitability at risk just as the industry enjoys a rare boom. Managing working days is especially urgent: HD Hyundai Heavy Industries halted all production lines and shut down all its facilities for a safety review last month following a serious industrial accident.

The third quarter is already a lean period for shipbuilders, with the monsoon season, summer heat, summer holidays and the Chuseok holiday all cutting into working days — making productivity gains critical to second-half earnings. The combined order backlog of the three major shipbuilders stood at $145.4 billion as of the end of the second quarter, surpassing 200 trillion won for the first time since 2014. Capacity utilization rates in the first quarter were running at near or above full capacity — HD Korea Shipbuilding's shipbuilding division at 103.9 percent, Hanwha Ocean at 99.5 percent and Samsung Heavy Industries at 99.7 percent — leaving no room to absorb production delays. Should a strike cause schedule slippage, the companies could face hefty penalty payments to shipowners depending on the terms of their contracts.


keg@heraldcorp.com