Headquarters of Hyundai Motor and Kia in Seoul / Courtesy of Hyundai Motor Group

A possible strike by Hyundai Motor's labor union is feared to create a domino effect on other automakers and parts manufacturers, which will likely deal a severe blow to Korea's export drive, experts and industry officials said Wednesday.

An overwhelming majority of Hyundai Motor's union workers voted in favor of a strike earlier this week to protest its botched wage talks with management. In response, the union decided to reject any overtime work every Saturday starting from July 6.

If Hyundai Motor's management rejects the union's wage proposals, there is a strong possibility that workers may initiate a full-scale strike. This would mark the first time in six years that the militant union has staged a walkout.

The stark difference in positions has made it difficult for them to reach a compromise. Hyundai Motor's management proposed an increase of 101,000 won ($72.61) in base pay along with additional incentives. However, the union rejected this offer and demanded that management raise the base pay to 159,000 won and provide a special incentive equivalent to 900 percent of their monthly salary.

Experts and automobile industry officials argue that a potential strike by Hyundai Motor's union could prompt counterparts from other automakers to take similar collective actions.

"Any decision by Hyundai Motor's unionized workers is a barometer for other carmakers – such as Kia and General Motors (GM) – to follow similar footsteps in their own labor negotiations," Lee Ho-geun, an automotive engineering professor at Daedeok University, said. "Under the worst-case scenario, Korea's exports will be hit hard in the wake of delayed vehicle production."

Hyundai Motor's unionized workers leave earlier from work as a form of protest during wage negotiations with management at its factory in the southern city of Ulsan, July 12, 2023. Yonhap

It is time for Hyundai Motor's labor union to reach an agreement with management by reconsidering what is widely perceived as "excessive" demands in its wage negotiations, according to Lee.

"Given the Hyundai Motor union's huge influence in the overall auto industry here, they are advised to come to terms with their management to keep the nation's auto exports on the right track," he said.

An official at an automaker here also said the Hyundai Motor union needs to make a very careful decision in its wage talks due to its symbolic status here.

"Any potential strike by Hyundai Motor's union affects not just the automaker, but others," the official said. "Other companies under the Korean Metal Workers' Union will also take a similar collective action and have a negative impact on auto exports."

Hyundai Motor Group is also feared to suffer huge damage from the possible strike by its union, at a time when the global auto industry is facing a slowdown amid prolonged high interest rates, according to the official.