Hyundai Motor, the world's fifth-largest automaker, is no stranger to worker strikes but the current episode—its biggest ever—is raising alarm bells. The company's labour union in South Korea conducted its first nationwide, full-day walkout in 12 years on Monday over demands for wage increases. The strike is expected to continue until next week depending on the company's response, a union spokesman told Reuters.

For the past three decades, Hyundai workers have gone on strike nearly every year but this year's stoppage is particularly severe, according to statistics from brokerage Kiwoom Securities. Unionized members have gone on strike 21 times and engaged in 27 rounds of wage negotiations so far this year, a new annual record.





That's resulted in a production loss of 117,000 cars, worth more than 2.5 trillion won ($2.5 billion), Hyundai's largest strike-related output loss.





Because this week's strike is illegal, there is a "no work, no pay" policy in effect. Income loss is estimated at about 2 million won ($1,790) per worker, the highest ever recorded.

Impact on Hyundai

This week's events are sure to dent the company's third quarter earnings, due October 1, and while the direct impact is expected to be limited, the outlook is not rosy.

Hyundai's operating profit will likely to take a 2.5 percent hit from strike-related losses, said Daniel Yoo, head of global wealth management at Kiwoom. The relatively mild overall impact on earnings meant Hyundai does have more room to increase labour costs and end the current deadlock, he continued. But because recent earnings growth has been poor, bosses may be wary to give into worker's demands, Yoo suggested. The company's second quarter net profit fell 2.6 percent on year, the 10th straight quarterly decline. "Korea's overall corporate earnings peaked in 2011 and there hasn't been much earnings growth since then so you can't blame management," Yoo said. The larger, impact, however, could be on the company's reputation. "Hyundai's image is currently having a hard time; there's a perception that the firm is behind the curve when it comes to electric cars so this strike is magnifying the negative image," Yoo said.



Wider implications