Hyundai Shrugs Off High Domestic Production Costs

Hyundai Motor Co. insists it will maintain its production base in South Korea, even though its factories there have the company's highest labor costs, Reuters reports.

The company has been plagued with repeated strikes and brief work stoppages. Contract agreements over the past 10 years have more than doubled pay for hourly workers to nearly $89,000, according to the news service.

Reuters says Hyundai's domestic hourly labor rate averages 24,800 won ($23.25) three times the rate in China and 16% more than in the U.S.

But analysts say the company may be entering a period of less confrontational labor relations now that Hyundai's union has elected moderate Lee Kyung-hoon as its new president.

In the meantime, Hyundai has sought to offset inefficiencies by operating its Korean factories 20 hours per day. This year the company bowed to union demands to eliminate overnight work, trimming operations to 17 hours per day. But it also implemented a new shift system that Reuters says enables it to increase hourly output 7%.

Union president Lee has said he wants to reduce the number of work hours to 16 by 2015 without hurting wages, according to Reuters. It says the company may attempt to set a wage cap for long-time workers and introduce a lower starting wage for new hires.