The company does not belong solely to the president or shareholders. The workers employed there are also a part of the company.
Workers have the right to form unions, negotiate collectively, and strike if their demands are not met.
When CarOS acquired Chrysler, it included provisions regarding employment succession. Therefore, we did not implement wage cuts or restructuring after the acquisition.
Ryan said, “If production disruptions occur, even the remaining sales network will completely collapse.”
The nature of the automotive industry, with its reliance on conveyor belt operations, means that if workers at one stage of the process stop working, the entire factory halts.
Given the large number of workers and their strength, unions have traditionally been strong.
In the past, the United Auto Workers (UAW) were infamous for targeting the most profitable of the Big Three (GM, Ford, Chrysler) in order to secure maximum wage increases and various benefits.
However, productivity did not improve in line with wage increases. This led to a high-cost, low-efficiency structure, which weakened the competitiveness of American automobiles.
Yet, such favorable conditions for workers did not last long.
When the financial crisis hit in 2008, the Big Three automakers collapsed simultaneously.
GM, as the eldest among the Big Three, closed 17 of its 47 plants in the U.S. and laid off one-third of its production workers.
The automotive industry has a significant employment-generating effect and, consequently, a major impact on the economy.
The government enacted bailouts and demanded concessions from unions, leading the UAW to agree to wage freezes, defer strikes, and relinquish bonuses and various welfare benefits.
Though late, they realized the fundamental truth that for the company to survive, workers also must.
Subsequently, they actively agreed to reassignment and retraining to enhance productivity. They changed their collective bargaining agreements from annually to every four years, enabling American automakers to establish more stable long-term management plans.
As productivity improved, GM increased its U.S. output twofold instead of building overseas plants, hiring more workers.
However, Chrysler’s situation was not promising, even within the Big Three. That’s why the FCA Group hastily sought to sell. Unfortunately, the situation worsened after our acquisition.
The reason is that sales plummeted after refusing the dealers’ request to raise margins.
“Some production lines have stopped, and workers are feeling job insecurity. There are also significant complaints about reduced bonuses due to the loss of overtime and special shifts.”
I let out a sigh and said, “Last time it was the dealers’ problem, but this time it’s the union’s problem.”
The automotive industry truly intertwines all the issues in manufacturing. No wonder not just anyone can jump in carelessly.
I picked up a document from my desk. It contained the union’s demands. I had glanced at it several times before coming here, but I skimmed it again.
“6.8% wage increase, a ban on layoffs for the next ten years, extension of retirement age, normalization of production lines… up to this point, I can understand.”
However, the demands below are ridiculous.
Distribution of company shares worth $30,000 per union member, a 30% share of net profits upon turning a profit, involvement of union representatives in company management, union consent for production line relocation, and union consent for the distribution of production volumes at new factories, among others.
When I first saw these demands, I felt I had seen them somewhere before…
“It seems they’re learning from the Eunsung Motors union.”
Globally, automotive unions are powerful, but they cannot be compared to the Eunsung Motors union (limited to South Korea).
The Eunsung Motors union has a reputation for conducting annual strikes, making headlines worldwide. They are difficult to stop. Even the pro-business policies of the Park Si-hyeong government couldn’t touch them.
Just looking at the conditions they put forth each year is shocking.
Base salary increases, 30% of net profits as performance bonuses, bonus increases, retirement pay raises, retirement age extensions, preferences for long-term employees, full support for children of workers regarding entrance and tuition fees, negotiations with the union for new hires, discussions with the union for new overseas factories, collaboration with the union for model introduction and production volume distribution, negotiation with the union for production line relocation, and prioritization of employment for children of long-term workers, among others.
At this point, it’s hard to distinguish whether they are workers or management.
The union claims these demands are natural measures to improve low wages and poor working conditions, but one of the demands is prioritizing the employment of children of long-term workers.
If a parent is a member of the Eunsung Motors union, they want the opportunity for their descendants to work there too.
Criticism has poured in, likening this to a modern version of nepotism, but the Eunsung Motors union hasn’t flinched.
The original labor union is an organization aimed at maximizing the interests of its members. Therefore, the Eunsung Car union only cares about its own share and has no need to worry about public opinion.
The problem is that the livelihoods of numerous workers from partner companies depend on Eunsung Car.
The moment the Eunsung Car union goes on strike and halts production, the factories of first, second, and third-tier suppliers also come to a complete stop.
It is said that when Eunsung Car coughs, the suppliers get pneumonia.
Thus, whenever it is the season for wage negotiations at Eunsung Car, the CEOs and workers of the partner companies desperately pray that the union does not strike.
However, the Eunsung Car union has consistently and vigorously struck every year.
The reason this is possible is that Eunsung Car has essentially established a monopoly in Korea. Both the management and workers know that no matter what happens, the company will not go bankrupt.
As long as they make cars, they sell, so they can strike without any burden, unaffected by external variables like financial crises.
Despite the frequent strikes, how could Eunsung Car grow?
The answer lies in its overseas factories. If they had operated only in Korea, they would have gone under long ago.
Eunsung Car management has mostly met the demands of the union. In exchange, they stopped building more factories in Korea, while continuously expanding factories in Mexico, Brazil, Russia, the Czech Republic, Turkey, India, China, Slovakia, and other countries.
This is not just true for Eunsung Car.
The fact that Korean automotive unions are powerful is already known worldwide, and other car companies are reluctant to build factories in Korea.
Since GM Daewoo established its factory in Gunsan in 1997, no new automotive factories have been built in Korea.
Naturally, domestic production has stagnated. Despite being an automotive powerhouse, Korea recently fell to sixth place, overtaken by India, and is expected to be surpassed by Mexico soon.
It is right to sincerely engage in negotiations with the union and meet reasonable demands. However, once you start being dragged along, there is no solution.
“The first negotiation is in three days.”
I nodded.
“I will meet with the union representatives directly. Until then, let’s think about the negotiation proposal.”
***
As time was running out for negotiations, the meetings continued without a moment to breathe.
I wrote three words on the whiteboard.
– Research and Development
– Production
– Sales
The stages of car manufacturing consist mainly of these three steps. First, new cars are researched and developed, then produced in factories, and finally sold to consumers.
I joked, “We should say that sales are currently a bust.”
At my words, those in the conference room smirked.
Cars are the second-largest asset after homes. Instead of paying in full cash, they are often bought through financing or leasing, meaning financial institutions are inevitably involved in sales. Additionally, considering consumer preferences and demand, inventory and supply must be professionally managed.
This role is fulfilled by dealerships.
Dealerships around the world sell vehicles to local consumers through consignment or direct purchase. (The only exception is Nikola, which sells directly through its website without going through dealerships.)
“The problem is production….”
Research and development is done at headquarters, while sales are handled by dealerships. Naturally, production is the responsibility of factories.
In the past, it was common to have factories in the country where headquarters were located. GM was in the U.S., Toyota in Japan, Volkswagen in Germany, and Hyundai in Korea.
However, as the world globalized, car companies established factories in various countries.
For example, GM exports cars produced in U.S. factories to Korea and vice versa for cars made in Korean factories to the U.S.
As long as it is efficient, the location of production doesn’t matter, just as Mexico, which has no emerging car brands, ranks as the seventh-largest car producer in the world.
Factories with lower productivity can be shut down at any time. Recently, GM closed its Holden factory in Australia.
That said, it hasn’t withdrawn from the Australian market. The Holden brand continues to be sold, but the quantities previously produced in Australia are now produced in other countries for export.
Sales compete among different car brands, but production competes among factories in each region.
In other words, the American factory and the Korean factory, both part of GM, are actually competing over production volumes. If the productivity of the Korean factory is deemed low, it could be closed at any time, similar to the case in Australia, and production could be shifted to another region.
“The area where CarOS has the greatest strength is not in production or sales, but in research and development.”
We possess the most advanced autonomous driving technology compared to our competitors. We plan to launch a new vehicle equipped with this technology for production.
Financially, we are tight on funds until the new car’s launch. If the money runs out, OTK Company will have to provide support again.
The issue is that OTK Company has limited funds left after purchasing SeosungSB shares and building the TS Company factory.
If production is disrupted, what would be the best course of action?
***
The first negotiation took place in a conference room at the Detroit factory.
We arrived early and waited. After a while, the door opened, and people came in. I was startled when I saw the first person enter.
It was a middle-aged man with a bald head and a thick mustache and beard. He was nearly 2 meters tall. No, not just nearly, he was definitely over 2 meters.
Maybe around 2.2 meters?
He had a bulging belly, but his massive size didn’t make him feel fat. The forearm that peeked out from under his sleeve was thicker than my thigh.
The shining bald head under the light felt intimidating.
I thought my senior, Sang-yeop, looked like a bear, but compared to this man, he resembled a teddy bear.
Who on earth is this guy?
Could he be a pro wrestler sent to overpower the management?
“I’m Union Chairman Dennis Block.”
“Oh, yes.”
So he’s the union chairman. I almost misunderstood. He kind of looks like Big Show.
But that wasn’t the end of it. Next, an African American resembling The Rock, and a white man who looked like Brock Lesnar entered and stood on either side of him.
Are union representatives chosen like pro wrestlers here?
Seeing the physicality of American workers made me suddenly miss Korea.
Dennis looked at Ellie standing next to me and said, “Did you bring your girlfriend to such an occasion?”
“Well…”
It’s true that she’s my girlfriend.
Ellie smiled as if nothing was wrong and introduced herself.
“Nice to meet you. I’m attorney Ellie Kim.”
He looked taken aback, as if he didn’t expect such a beauty to be a lawyer.
“Hmm, nice to meet you.”
Thanks to Ellie, I was able to regain some composure. Surely they wouldn’t hit me just because the negotiations weren’t going well?
But if I were to be hit, I could die…
“I am Kang Jin-hoo, the CEO of OTK Company. Nice to meet you.”
The union representatives looked at me with curiosity. It seemed they were surprised that I had come in person.
We each greeted one another and took our seats.
First, CEO Daryl of CarOS spoke up.
“I have thoroughly looked into the union’s demands. It is impossible for management to accept all of those demands.”
At this, Dennis raised his eyebrows.
“If our demands are not accepted, we will have no choice but to go on strike.”
To go on strike, more than two-thirds of the union members must vote in favor. Given the current situation, the likelihood of approval is quite high.
I nodded.
“Well, then do what you must.”
The eyes of the union representatives turned towards me in unison.
I continued, looking at them.
“I respect the rights of all workers. Even if you go on strike, there will be no workplace closures or layoffs. Salaries will continue to be paid. So, whether you choose to work while receiving a salary or go on strike, that decision is up to you.”
Lazy workers