SOUTH KOREA: Police raid strike-hit auto parts factory

Thousands of riot police have raided a Korean auto parts factory to end a prolonged illegal strike by union members which is threatening suspension of production in the nation’s auto industry.

As KHABAR KHODRO reports , About 3,000 riot police were sent to the Yoosung Enterprise factory about 90km southwest of Seoul, to disperse about 500 striking workers who have occupied the workplace by staging a sit-in protest since 18 May, the Korea Herald reported.

The operation came after 11th-hour negotiations between labour and management, to narrow their gap on key issues such as work hours, broke down.

There have been concerns in Korea that the illegal strike will deal a heavy blow to Korean carmakers.

The strike's impact on Hyundai Motor Group carmakers deepened on Tuesday bringing additional assembly lines to a halt.

Industry sources told the paper that, unless the parts company is back to normal by the end of this month, the damage to Hyundai, Kia and their suppliers is estimated to exceed KRW2 trillion.

Due to shortages of piston rings produced by Yoosung, Hyundai Motor and affiliate Kia Motors’ plants producing diesel engines have been operating at below full capacity.

With diesel engine production being affected, production of models with diesel engines has also been affected.

Kia stopped producing the diesel version of the Carnival/Sedona minivan at its plant in Gyeonggi Province on Friday while Hyundai reduced output of diesel Santa Fe and Tucson ix SUVs on Monday.

Yoosung has 80% of the country's piston ring market. Workers there went on strike on 16 May and two days later began a sit-in strike.

Yoosung makes about 70% of the piston rings used in Hyundai and Kia vehicles.

With the companies running out of inventories, the assembly lines for the Starex van and the light truck Porter are also experiencing difficulties.

“The plant producing A-engine had been operating at less than half capacity, but with the stock running low,” a Hyundai Motor official told the Korea Herald. The A-engine is a diesel engine used in the two models. “The company does have A-engines in stock, but the volume of stock is very low.”

The two companies also expect output of bestsellers including the Kia Sportage R compact SUV and the K5 sedan to be affected from Wednesday.

According to the company, if the situation continues, it could result in 48,000 units in lost production and KRW827bn (US$756m) in lost revenues by the end of the month.

Troubles at the carmakers are also affecting other parts makers.

With Yoosung Enterprise and its union failing to reach a compromise, concerns are mounting that the labour dispute might be prolonged despite police intervention in the case.

The police took the action after a court issued an arrest warrant for two union members alleged to be the driving force behind the sit-in strike.

"Exports are okay for a while but our domestic sales will be seriously disrupted" if the strike continues, a Hyundai spokesman told news agency AFP.

NH Investment and Securities analyst Jess Lee told Dow Jones Newswires that Hyundai and Kia have two months' inventory of completed vehicles in global markets.

Yonhap news agency predicted that Hyundai and Kia would be forced to curtail output by some 40,000 units this month if the walkout continues until the end of May.

It forecast that other automakers would see production cut by about 10,000.

The Korea Automobile Manufacturers Association has called for quick government action, saying a prolonged walkout could seriously hurt the global competitiveness of the country's automakers.

GM Korea uses Yoosung piston rings in about 50% of its models.

Renault Samsung, the local unit of Renault SA, said it expects no major disruptions even though Yoosung supplies camshafts for its SM5 model.

Ssangyong Motor, controlled by India's Mahindra and Mahindra, uses Yoosung's piston rings for its large-size Chairman sedan. It told AFP it has enough inventory to keep production going to the end of July.