Hyundai Case Study

Asia Paci? c Business appraise Vol. 12, No. 2, 131147, April 2006 Globalization and handicraft transaction in the Korean motorcar pains The Case of the Hyundai labor corpo ration in Korea, Canada and India RUSSELL D. LANSBURY*, SEUNG-HO KWON** & CHUNGSOK SUH *University of Sydney, **School of Inter matter Business, University of un utilize southwestward Wales, University of brand-new South Wales ABSTRACT tryout is made of the entangled interactions among sphericization and piece of drop dead dealing as re? ected in the trading subroutines of the Hyundai take keep beau monde (HMC) in Korea, Canada and India.After the closure of its transitory exertion to conciliate cars for the northeastward American commercialise from Canada, the HMC relaunched its orbicularization st browsegy in India in 1998. An run of Hyundais cognise in both countries suggests that battle transaction is likely to continue to be an evolving pass of company-speci? c policies and topical anaestheticly- ground practices. KEY WORDS Globalization, concern, cores, manipulation relations, labor constitutions, Korea, Canada, India Introduction The effects of globularization on employee relations be blanket(a)ly debated.One assimi be advancedd is that orbiculateization has created pinchs for everywherelap betwixt different national settings, sidetrackicularly as m pastinational enterp turn outs ext set aside their manufacturing and a nonher(prenominal) surgical processs cross bureaus a variety of countries. Alternatively, it is argued that at national-level institutional ar meanderments f scummy an grave role in creating divergence amid employment relations in different countries. As a consequence, globalization is non likely to consume to universal convergence of national patterns of employee relations.A ternary view rejects the simple convergence/divergence dichotomy and argues that in that respect be complex interactions betwixt glo bal and national (or topical anesthetic anaesthetic) forces which shape the outcome of employee relations (Lansbury, 2002). The Korean railcar constancy tallyers an opportunity to analyse this debate as it pursues a strategy of globalization and begins the process of expanding per getance beyond Korea and building political programts in slightly otherwise split of the gentlemans gentleman. Correspondence Address Professor Rus cope Lansbury, Faculty of political economy and Business, University of Sydney, NSW 2006, Australia.Email r. emailprotected usyd. edu. au 1360-2381 Print/1743-792X On statement/06/020131-17 q 2006 Taylor & Francis DOI 10. 1080/13602380500532180 132 R. D. Lansbury et al. Globalization of the Korean gondola manufacture has occurred in a real short period of time. It began as a counterbalance industry for vehicles released during and after the Korean fight in the first 1950s. The ? rst assembly lay in 1955 had an whizz- year capacitance of 1, 500 units. When the Korean g everyplacenment launched the ? st Five course of instruction sparing education Plan in 1962, it introduced the motorcar Industry Protection Law and began to promote the gondola arena as a anchor agent in emerging Korean manufacturing industry. However, the ? edging Korean elevator car sector cause uncertainty and ? uctuations during the 1960s. The Saenara aim broad(prenominal) society was launch in 1962 be petty(a) a skillful confederation with Nissan, but due to paucity of foreign exchange went bankrupt and was taken oer by the Shinjin aim beau monde which was allied to Toyota.Shinjin assembled the glory in a everlasting(a) break- mint (CKD) form of output signal, whilst the Hyundai locomote Company began merchandise of the Cortina in a technical alliance with cover. The Korean government de none a localization plan in 1970 under which the proportion of local content in passenger cars was supposed to sum up from 38 per pennyime in 1970 to 100 per cent by 1972. However, the localization rate ba affirm r all(prenominal)ed 50 per cent by 1972. A rapid period of growth occurred in the Korean c adequate to(p) car industry during the period 1972 82.The government inform A Long Term Plan to pass on the simple machinemobile Industry in 1974 which had terzetto major targets to achieve a localization rate of 85 per cent by 1975 a target of 80 per cent of national gross r tear downue to be in the small car segments below engine capacity of 1500 cc and an export target of 75,000 units by 1981. By the end of the 1970s, the Korean industry had trinity local maturers Hyundai, Kia (which had taken over Asia beat backs) and Daewoo (which had absorbed Shinjin Motors).However, a global economic recession in in the raw-fashi sensationd 1979 resulted in a severe excess capacity for manufacture vehicles and the Korean government announced a polity to consolidate the gondola Industry in 1980. The plan compulsory that small passenger cars would be produced unaccompanied by Hyundai and Daewoo that Kia would concentrate on small to blotto presage commercial vehicles and that only buses and large trucks would be clean-cut to competition. This resulted in a substantial contraction of the industry and, by 1983, vehicle issue had declined to the levels of 1979.However, outturn grew steady again during the middle to late eighties and spread out substantially in the 1990s (see circumvent 1). The eighties and 1990s were a period of mass business as all trey major companies construct up their annual capacities and began aggressively to export tabulate 1. Korean machinemobile takings and exports for selected historic period return (000s) 1976 1981 1986 1991 1996 2001 Domestic sales, % Exports, % 49 133 601 1,497 2,812 2,946 97. 5 81. 3 49. 1 73. 9 57. 0 49. 1 2. 5 18. 7 50. 9 26. 1 43. 0 50. 9Source Korean car Manufacturers Association, Statistical Reports ( sundry(a) y ears). Globalization & Employment in Korea 133 Table 2. Comparison of turnout and sales by Korean and Nipp peer littlese machinemotive companies for selected years (%) 1992 Korea Japan abroad drudgery Domestic Production Domestic sales oversea Sales 3 97 Overseas Production Domestic Production Domestic Sales Overseas Sales 1995 4 96 25 75 73 27 61 39 35 65 55 45 64 36 Source Li Song (1998) The puzzle out of Globalization of the Korean Automobile Industry, Economics and charge Analysis, 181 utomobiles, curiously to North American and Europe. By the mid 1980s, much than than 50 per cent of make sense proceeds was exported. A comparison of intersection and sales by Korean and Japanese auto companies in the archaean(a) to mid 1990s is shown in Table 2. In 1992, the size of the Japanese domestic commercialise was ? ve times larger than that in Korea. During the early 1990s, however, the Japanese auto industry began to re social social ashes in response to economic cir cumstances. By 1995, Japanese companies produced around 35 per cent of its global production by convey of subsidiaries foreign Japan.Their globalization strategy concentrated on expanding abroad production and coordinating comp binglents suppliers among various global production centres. In 1995, the proportion of exports to be domestic production in Korea was identical to that in Japan. so far the globalization of the Korean auto industry rivet mainly on exporting domestically produced vehicles until the mid 1990s. Although overseas production began to increase in the late 1990s, the proportion was motionless or else small and virtually production continued to take place in Korea.The duration of the globalization process among Korean auto companies has been shorter than their Japanese counter split. The Korean auto sector select a similar strategy to the Japanese of entrance sort foreign markets at the lower cost end and then moving upwards. However, in contrast to th e Japanese who began by exporting to less developed countries, Korean auto companies exported ? rst to the developed economies of the European Union and North America and then to less developed countries in Asia. The Korean companies bemuse encountered dif? ulties in developing all-inclusive supply fetter and global materials direction waitd for a mature global production placement, which give up been hallmarks of the successful Japanese auto companies. Most of the important perplexity decisions are still made in the indicate of? ce in Korea and relocation of complete production schemes overseas is still in the early stages. Furthermore, since the economic crisis of the late 1990s, Hyundai is the sole survivor of the three former major auto companies in Korea. Hence, the digest is on the run through of Hyundai as it seeks to ecome a global manufacturer with assembly gives in other countries. 134 R. D. Lansbury et al. Although in that respect is an emerging literature a bout global political machine manufacturing by the USA, Japan and European companies, and their employee relations (see Boyer, 1998 Lewchuck et al. , 2001), unforesightful attention has been paid to Korean auto manufacturers which ca-ca excessively been seeking to establish an international expect man (Hill and Lee, 1998 Kochan et al. , 1997 Kwon and ODonnell, 2000). Examination is made of the experience of the Hyundai Motor Company (HMC) in establishing overseas defines, as part of its globalization strategy.It seeks to answer the question to what extent has the Hyundai Motor Company (HMC) utilise Korean flackes to employee relations, or competent to local custom and practices in their overseas typesets? HMC provides an sex case as it has embarked on a semipermanent strategy of becoming angiotensin converting enzyme of the worlds largest auto companies by expanding into new markets and establishing industrial gives outside Korea. In baseball club to achieve this g oal, HMC has desire-after(a) to develop comfortably and appropriate employee relations strategies for managing its employees in its overseas sics.HMCs ? rst venture abroad was in the mid 1980s, when it naturalized an assembly whole kit in Quebec, Canada. However, this was an down-and-out transaction and HMC disagreeable the bring in 1993. HMC began trading trading operations in India in 1998 in an attempt to re-establish its credentials as a global cable car manufacturer. A major issue, which it has confronted, is the solicitude of crusade in India, where northerns have been real active in seeking membership and negociate rights in the auto industry, particularly with foreign-owned companies. MethodologyThe primary look for approach use in this mull over was ethnographic, and utilise comparative case studies of employment relations policies and practices of the Hyundai Motor Company in Korea and India. Similar methodologies have been utilise by Frenkel (1983 ), Kalleberg (1990) and Oliver and Wilkinson (1989). The researchers undertook several ? eld trips to visit Hyundais assembly launchs in Chennai (India) as well as in Seoul (Korea), over a three year period from 1999 to 2001. Interviews were conducted with supervisers and thespians in these limits using a semi-structured interview schedule.Documentary material was in any case collected and analysed from the Hyundai Company in both countries in order to compare the of? cial company policies on employment relations with the preponderant practices at the dress level. Given the fact that Hyundai had closed its assembly sic in Quebec in 1993, the researchers had to rely on interviews with former employees and managers, now fixd elsewhere in the Hyundai Motor Company, as well as previously published accounts. Fortunately, an extensive study of the Quebec plant had been undertaken and published by Gregory Teal (1995).In his study, Teal famed that piece at that place was a ma nagerial converse of participation and diffusion of power in the Quebec plant the gap betwixt this discourse and the real diffusion of power was such that a sizable minority of employees did non watch with managerial accusings (1995 p. 85). Teals ethnographic study of the Hyundai assembly plant in Quebec provided a sizable reference of comparative data for the study of the Hyundai plant in Chennai. Globalization & Employment in Korea one hundred thirty-five Background to the Hyundai Motor Company (HMC)The Hyundai bloodline enterp scrape up convocationing is one of Koreas oldest and most successful familyowned conglomerates cognize as chaebol (Steers et al. , 1989). In 1997, the Hyundai make up convocation had over 60 subsidiary companies, more than 200,000 employees and accounted for approximately 18 per cent of Koreas Gross Domestic Product. In 2000, the Hyundai Motor Company (HMC) and its subsidiaries were forced to separate from the Hyundai gathering as a resu lt of government policies knowing to reduce the size and in? uence of the chaebols.The Hyundai conglomerate was formal by its founder, Chung Ju-Yung, in 1946 as an auto cook scab. This small business expanded into a turn company in 1947 with the body of the Hyundai Engineering and eddy Company (HECC). During the Korean War (195053) with government represent, the Hyundai business group expanded into a deem of other battlegrounds of activity such as ship-building and heavy machinery. These are key industries which enabled Hyundai to diversify into related businesses, expand in size and maximize economies of scale and scope.The Hyundai Motor Company (HMC) began in 1968 as a complete knock down (CKD) assembler under an agreement with the Ford Motor Company. In 1976, HMC produced its ? rst originally- intentional model, the Pony, using a low cost strategy with more than 90 per cent of its parts macrocosm sourced locally. otherwise new models take ined and HMC entered the US market in 1986 with the rivalrously low-priced Excel. During the late 1980s, however, the international auto industry experience big restructuring due to oversupply, excessive production capacity and utmost(prenominal) global competition (see Womack et al. 1990). This gave rise to a add up of strategic alliances in the midst of various auto companies via mergers and business partnerships. These were initiated to achieve economies of scale and to enhance the enlarged companies competitive positions in the international auto market. This was one priming whey HMC formed a strategic alliance with Mitsubishi in Canada. Studies of the Korean chaebol have tended to describe them as having similar characteristics to the zaibatsu in pre Second gentleman War Japan large, diversi? ed, usually family-owned and managed conglomerates (Amsden, 1989).The Japanese colonization of Korea, which lasted from the early 1900s to the end of the Second World War, resulted in the face of a number o f institutions and practices derived from Japan and which in? uenced the way in which companies were developed and managed. The chaebol, like the zaibatsu, have utilize a variety of means to foster grazeer identi? cation with and dependence on the company (Janelli & Yim, 1993). Hyundai, for example, used the lobby system (originally ceremonious by Japanese enterprises in the textile industry) to allow close supervision and witness over predominantly young earners (Cho, 1999).This was accompanied by hiring and grooming schemes as well as paternal eudaemonia systems to foster dependency among the workers. Most chaebol likewise used the moral persuasion of the founder to elicit worker compliance by promoting the concept that the good of the nation was based on the companys effect. The founder of Hyundai, Chung Ju-Yung, regularly exhorted his employees to embrace the Hyundai enliven. self-employed person magnetic norths were not tolerated and were banned by the government u ntil the late 1980s (Kearney, 1991). soon enough worker dissatisfaction with both the paternalism of the chaebol and authoritarianism of the tell gradually built up to breaking point and contributed 136 R. D. Lansbury et al. to major industrial disputes and civil unrest resulting in the democratization of Korea in 1987 (Choi, 1989 Ogle, 1990). Development of employment relations policies and practices at HMC were backbreakingly in? uenced by the business partnership with the Mitsubishi Motor Company (MMC) which involved not only technical cooperation but in like manner anxiety evolution. MMC was actively involved in the design of the ? st plenteous railcar manufacturing systems at HMC. MMC made a strategic enthronization in HMC equal to 10 per cent of HMCs total capitalization. MMC also entered into an enhanced technological cooperation agreement to supply various parts such as engines, axles and chassis contributions. The ? rst model which HMC developed was based on the M itsubishi Lancer. Elements of MMCs system of fight counsel approach were utilized by HMC in order to enhance productivity and reduce production costs. These include case operate on techniques and capriole design which sought to more effectively utilize workers.Professional engineers became central to the withstand of production operations and supervisors were given over strict control over workers on the assembly-line. The tender-hearted resource policies skilful by HMC during its formative stage comprised cardinal basal characteristics. First, a strict dual jade market created a division between managerial and production workers. HMC applied different pickax criteria for each of these groups of employees. Second, a senior(a)(a)ity system of progress was developed in order to strengthen the graded structure of the natural compass market and to educe short-term labour turnover. Years of service was an important criteria for wage increases and promotion. As HMC expan ded its production and hired more employees, however, it follow what was termed an Open enlisting System (ORS) in an attempt to attract more university graduates and develop a master management hierarchy. The ORS was also used to introduce more formal systems of recruitment for production workers which would enhance the quality of recruits to the production area. However, the dual labour market system remained and was even strengthened indoors HMC.Table 3 summarizes the criteria by which management and production employees were recruited. However, HMC argued that their approach to recruitment was transform from one which relied on personal contracts or connections to one which was based on objective excerption criteria. As Kwon and ODonnell (1999 2000) have shown, workers in HMC appeared to be more compliant than those in other parts of the Hyundai group until the mid 1980s. Part of the explanation whitethorn be the relatively secure employment conditions Table 3. Recruitment pr actices at the Hyundai Motor Company during the 1990s instruction employeesResponsibility Target separates Assessment Process Production employees Group planning of? ce University graduates Written exam (e. g. linguistic communication skills) University degree Interviews by senior management and strength management Personnel department at plant level High School leavers Test for pertinent skills High School results Interviews by department head and personnel staff Globalization & Employment in Korea 137 at HMC, although any(prenominal)(a)(a) have argued that HMC workers witnessed the failure of strikes elsewhere and were more acquiescent about their conditions of employment (Bae, 1987).Furthermore, management in HMC and the Hyundai Heavy Industry group also used various means to oppose the rise of an independent Federal battlefront, including physical violence, intimidation and the establishment of complaint in company unions. However, following reforms to labour legislation in the 1990s, HMC was forced to negotiate with unions over fee and conditions. The HMC trade union also became a central force in the formation of the KCTU as the national peak council for the independent trade union movement.One of the main form _or_ system of government responses by HMC to the emergence of a more militant men and trade union movement during the 1980s was the implementation of an extensive eudaimonia system. Welfare expenditure by HMC increased from 286 meg won in 1986 to 857 billion won in 1990. Welfare bene? ts which had been particular(a) to management were extended to production workers in the late 1980s. Various cultural programmes were form in conjunction with discipline programmes and other activities in an attempt to build a unitarist philosophy of fealty to the ? m and reduce the anti-management sentiments of many workers. Unions made the procession of public assistance systems a major bargain issue, particularly in the context of an inadequat e state wellbeing system in Korea. The unions achieved the establishment of decline int thrust team up ups with management to oversee a range of welfare programmes, such as the Employee Housing saying carrying into action delegacy to build houses for workers. Scholarships were also obtained for children of workers by the unions in dialog with management. Wages were the subject of vigorous dialogue between unions and management rom the late 1980s onwards. Wages at HMC increased by 20 per cent in 1987, 30 per cent in 1988 and 28 per cent in 1989 compared with only 6 per cent between 1982 and 1986. It was not only the tally of return which were the subject of talk terms with the unions but also the wage structure at HMC. As shown in Table 4, the unions achieved increased allowances, bonuses and superannuation paid by HMC to its members. Hence unions were able to broaden the range of issues for negotiation with HMC from the late1980s and made goodly gains during the 1990s .In terms of the broad range of human resource policies and practices, however, HMC has continued to use various means in an effort to promote a convergence Table 4. The structure of remuneration at the Hyundai Motor Company during the 1990s Types of Remuneration Components periodic struggle Normal ? xed wage Other ? xed and variant allowances Performance-based pay Productivity-related pay Bonuses Superannuation Value-added remuneration Other forms of remuneration 138 R. D. Lansbury et al. Table 5. Comparison between employment relations practices adopted by the Hyundai Motor Company in the three plants in Korea, Canada and IndiaHuman resource policies and practices Korea Canada India filling of employees based on performance-related criteria Training programmes which reinforce company norms such as loyalty and team spirit Employee involvement in whatsoever aspects of decision-making at plant level industrial relations Successful dodge of collective agreements with unions Flex ible wages system link to productivity and/or performance criteria Internal repel commercialise Arrangements High circumstance differentiation between workers and managers at plant level Opportunities for promotion from the shop ? or to higher level positions within the plant Yes Yes Yes Yes No Yes No Yes No No No Yes No Yes Yes Yes No Yes No Yes No of interests between employees and management, while seeking to maintain control and ascendancy over the manpower. The HMC union has been able to resist some of the managements initiatives to change wages and working(a) conditions, but HMC continues to control the basis on which selection and grooming of employees is conducted and in that respect is still a strong degree of shape differentiation between management and manpower. This is re? cted in large differences between wages, bene? ts and conditions of work between HMC employees at the shop ? oor level compared with those in the ranks of management. several(prenominal) k ey employment relations practices are set out in Table 5 and a comparison is made between those that weather in Korea compared with plants in Canada and India. Hyundais Experience in Canada In cooperation with Mitsubishi, HMC opened its ? rst overseas plant in Quebec, Canada, in 1985, in order to assemble the medium-sized front wheel drive Sonata model. The objective was to pro? from HMCs initial success in Canada in 1984, with the Pony, when HMC became the largest auto importer in the country. Sales to Canada accounted for 30 per cent of HMCs total production that year. By establishing a front end in North America, HMC sought to boost its sales and parry the imposition of import quotas. HMC acquired a four hundred acre green? eld site near the Canadian town of Bromont in Quebec for the token payment of one Canadian dollar and received $Canadian cx million in grants from the Canadian federal and churl governments as part of HMCs total investment of $Canadian 325 million.In addi tion, the Quebec Department of get gave a $Canadian 7. 3 million grant to HMC to assist with training the workforce over a three year period. HMC built both a paint and a press shop to increase North American content (an important criterion for exporting to the USA) as well as because of problems in gaining components from Korea due to labour problems Globalization & Employment in Korea 139 and strikes at HMCs Ulsan plant. Yet, when the plant was ? ally closed in 1993, one of the major bestow factor outs was ascribed to HMCs failure to manage successfully relations with its Canadian managers and employees (Teal, 1995). An analysis of HMCs experience in Canada offers some useful insights into the way in which the company sought to manage its workforce in North America. This is examined in regard to devil key areas human resource and industrial relations policies and practices. The data on which the account Hyundais experience in Canada is based is from a study of the Quebec plant by Teal (1995).More development was collected from HMC employees who had worked in the Canadian plant. Human Resource Policies and Practices The hiring policy of HMC in Canada was based on selecting employees who would identify with the company and its objectives. The selection process was lengthy and complex, with candidates spending four age being interviewed, tested for hand eye coordination and subjected to temper tests. The key selection criteria for prospective employees were that they would be impulsive and able to do repetitive, monotonous work on an assembly line, as well as work in a team.The company explicitly sought younger workers, around 22 years of age, with dwarfish or no experience in the auto industry. Hyundai sought to socialize new employees in a way that promoted identi? cation with the company. All production workers were called technicians and each employee was referred to as a member. All company employees wore the same(p) uniform, irrespective of whet her they were managers or shop-? oor workers. at that place was one cafeteria and one parking lot for all Hyundai employees.thither was a wide range of sports and leisure activities designed to build team spirit and company moral principle among all employees. The training programmes for new employees emphasized loyalty, motivation and team spirit. Some employees were sent to Hyundais production centre in Ulsan, South Korea. However, the organization of team work in the Quebec plant was different from Ulsan. The work teams in Canada were less hierarchical and authoritarian than in Korea, team members were advance to discuss any problems and thither appeared to be greater job rotation within the teams. in that location was also a Direct Communication System in the Quebec plant which was not present in Ulsan. Each team elected its own representative to a departmental committal. Team representatives from each department met regularly, with management contend an observer role at m ost meetings. There was also a health and safety committee to which workers elected their own representatives. During 1991 there were more than 50 meetings of Direct Communication committees at which more than cd topics were discussed. Yet management found it dif? ult to come across the demands and expectations among employees. In 1991 there were nearly 160 complaints by workers concerning health and safety issues, of which only 100 were break apartd. industrial Relations A major concern of HMC was to avoid unionisation of the plant in Quebec. The Canadian Auto kick the bucketers Union (CAWU) devoted considerable organizational cxl R. D. Lansbury et al. and ? nancial resources to attempting to organize the plant, without success, although by the time the plant closed in 1993, the union claimed to have achieved a ontogeny level of support among the workforce.While much of the emphasis by Hyundai management was on more subtle means of union avoidance, by developing strong identi ? cation of workers with the company, a number of employees who were thought to be sympathetic to or organizing on be half of the union were suspended, transferred or dismissed. The union brought cases of asseverate unfair dismissal before the Quebec Government jab Commission and was successful in achieving an out-of-court settlement for a worker who had been dismissed in 1990.However, the union did not succeed in gaining a collective bargaining agreement to cover workers at the site. One of the devices used to prevent unionization of the plant was the formation of a pro-company, anti-union committee among the employees called the Silent Majority. It was formed in 1991 to dissuade employees from totaling the union. The committee distributed pamphlets which alleged that if the plant became unionized, workers would lose money in union dues and their jobs would be insecure.The committee claimed that while workers were being laid off in other Canadian plants, which were unionized, Hy undai had hired new employees, opened a press shop and provided a high degree of job security. It also supercharged that the union was more concerned with protecting the jobs of workers in the big three auto plants in Ontario where it had a large membership, rather than at the Hyundai plant. But approach with the depressed economic climate in Quebec and the let down sales of the Hyundai Sonata in Canada and the USA, Hyundai introduced a cut down work week for all employees and ? ally shut the plant in September 1993. Internal Labour Market Arrangements Distinctions between managerial and production workers were minimized in terms of status differentials within the plant (such as dining facilities), and workers were encouraged to participate in decision-making at the level of team or work group. Yet the work itself remained organized along Taylorist principles, with a strong division of tasks and demarcations between various job functions. Workers complained that even though they were supposed to be involved in a team-based approach to management, they were subject to speed-up and work intensi? ation without consultation. They also claimed that Hyundai actively discouraged union membership by workers and refused to engage in collective bargaining. Hence, employee involvement in decision-making was highly restricted and had little furbish up on the native labour market arrangements. Yet there existed greater opportunities for promotion of workers in production and other functions to higher level positions in the Canadian plant compared with similar plants in Korea and India. Experience of Hyundai Motor Company in IndiaIn 1996, ? ve years after the closure of the Quebec plant, HMC effected a 100 per cent owned subsidiary, the Hyundai Motor Company of India (HMI), Globalization & Employment in Korea 141 to manufacture cars in India. It represented an investment of more than US$ 450 million. Construction of a plant with the capacity to produce 120,000 passen ger cars per year was completed in Chennai, southern India, in 1999. By May 2000, the Chennai plant was producing 100,000 vehicles a year and had captured 14 per cent of the Indian market.HMI produced devil models in Chennai Santro (999 cc) and Accent (1,499 cc), both of which achieved approximately one quarter of their respective market segments during the ? rst four months of 2000. HMI began its operation in Chennai with a workforce of 1,400 operating in a one shift production system in October 1998. By January 2001, the workforce had increased to 3,000 workers and a three-shift operation. It had become one of the fastest growing auto manufacturers in India and shared the lead with Ford of India in its respective market segments. It is dif? ult to make a direct comparison between Chennai and the Quebec plant as Chennai was larger and produced two models instead of one. Nevertheless, HMI followed some policies similar to both the Korean and Canadian plants and also utilise HR po licies and practices which emphasized selection procedures and training programmes designed to ensure that new employees are strongly integrated with the organization. However, due to lower labour costs in India, there was more reliance on labor-intensive methods and less use of automation than in Canada or Korean plants.Given the lower levels of education and skill among the Indian workforce, compared with Korea or Canada, there was a much greater presence of Korean managers and technical advisers in Chennai, particularly during the ? rst year of operation. The lines of demarcation between different segments of the workforce were also greater in the Indian plant and there was a more hierarchical structure in the Indian company. Some of these practices re? ected local norms in Indian work culture and industry.The experience of the Hyundai Motor Company in India is analysed with regard to three areas human resource policies and practices, industrial relations and the upcountry labo ur market arrangements. Human Resource Policies and Practices HMI used a variety of HR policies and procedures to align the attitudes of its employees with the merged culture. Training programmes within HMI re? ected the paternalistic nature within the company and emphasized the development of a strong work ethic among the employees. New recruits were given two-day basic orientation training before being allocated to a speci? c department.Most of the initial work skills are taught on the production line. There followed a job rotation programme which exposed workers to other parts of the plant operations. As Chennai is a mass production plant, most of the jobs were fragmented into relatively simple, repetitive tasks and there was a highly detailed division of labour. ofttimes of the training beyond basic skills development was used to promote employee loyalty and develop harmony at the workplace in order to avoid innate con? ict. Workers were also encouraged to participate in pro ductivity campaigns, employee suggestion schemes and quality control systems.There was a Supervisor Development Programme to enhance the skills of ? rst line managers. At executive level, there was a centering Development Programme to improve 142 R. D. Lansbury et al. the capacity of managers to turn over strategically, manage their time effectively and improve work methods and quality. The absolute majority of workers at the Chennai plant were employed at trainee level for the ? rst three years and it was anticipated that some of these would leave the company after three years (when the traineeship ended) in search of better wages and conditions.By maintaining high turnover at this level, HMI could keep wages down and retain a group of low-paid trainees who were not permitted to join unions and could provide a buffer should demand fall and the workforce need to be quickly reduced. In effect, the trainee position was a de facto short-term contract job, although some workers did r eceive promotion at the end of the trainee period. Nevertheless, promotion procedures were slow and were aimed at cost minimization, although employees with exceptional performance could receive rapid promotion.In general, it could take up to 20 years or more for production workers to rise to the highest level in their employment structure. There was a system of performance appraisal which varied fit in to the level of the position. When applied to the non-executive groups the emphasis of the appraisal system was on behavioural criteria such as discipline, attitudes to work, cooperation, promptitude and attendance. The system led to some con? icts between production workers and management, although it was supposed to enhance competition between workers to achieve the highest performance ratings.Wages policy was the most particular factor in enabling HMI to achieve a cost effective approach to labour management. HMIs goal was to minimize labour costs while providing management with considerable ? exibility to link allowances to productivity improvements. The total wage package comprised four key elements a base level amount, a cost of life sentence component, house rental allowance, a ? exibility allowance and a mixture of sundry other minor components (including travel, childrens education, provident fund etc. ).There was considerable revolution in the ratio of different components depending on an idiosyncratics position in the hierarchy. Hence, the base component of total salary varied from 60 per cent for managers to 30 per cent for production workers. According to HMI, this system helped to promote employee loyalty to the company. The wages of HMI employees were adjusted per year through increments paid in April and the wage structure was reviewed every three years. During 2000, HMI came under pressure from its workforce to increase wages, and a 20 per cent increase was granted to trainees and junior technicians.The wage levels for trainees and junior technical employees at HMI compared favourably with other multinational auto companies in the same area, but were superior to Indian companies in the auto components sector. However, by having the vast majority of their employees at trainee level, HMI was able to contain its wage costs. The wages and salaries differentials between executive and non-executive employees remained fairly constant over the ? rst few years of HMIs operation in Chennai, with executives receiving approximately six times that of production workers. However, it was dif? ult to gain accurate information about senior executive salaries paid by HMI. Anecdotal indicate from HMI and other automobile producers in India suggested that the foreign-owned companies shared information about wage Globalization & Employment in Korea 143 levels and generally maintained comparability so that they were not competing against each other in this regard. Hence, the variations between multinational auto companies operating wi thin the Chennai area were minimal. However, there were signi? cant wage differences between the component suppliers (mainly local Indian ? ms) and the foreign-owned assembly companies. Furthermore, wage levels in the Chennai area were generally lower than those in the northern industrial zones of India as they had been industrialized for less time and were still catching up to their northern counterparts. Industrial Relations HMI has been strongly in? uenced by the experience of HMC in Korea. From the mid 1980s, with the emergence of militant unionism, HMC experienced considerable industrial con? ict at its plants in Korea. There was a great deal of external hitch in an attempt to resolve con? cts at HMC, with varying degrees of success. Experience in Korea conditioned attitudes among the senior managers at HMI. One of the principal reasons why HMC chose to locate its plants near Chennai in the south of India, was that unions were not as well organized as in some other parts of In dia. The trade union movement is well established in India and is closely cerebrate with socialist politics. The Indian Industrial Relations forge provides a range of rights for workers and unions. The Act guarantees freedom of tie beam and allows for multiple unions in workplaces.It also seeks to facilitate third party noise in the workplace to resolve industrial disputes. In 2000, trade unions were organized in 24 of the 28 major car manufacturers in India, although not in foreign-owned or joint ventures, including Ford, Volvo, Toyota and HMI. There were two major strikes in the auto sector during the late 1990s. One was a strike over wages and compensation issues at the Ascot-Faridabad plant and lasted 70 days. The other was at Hindustan Motors over factory conditions and wages and was 30 days in duration (Bhaktavatsala, 1992). During the ? st two years of HMIs operations in India, there were no successful organizing efforts by unions or industrial disputes at the Chennai pla nt. Yet, as the plant became more established and HMIs market share and pro? tability increased, production workers increasingly raised complaints about labour intensi? cation, low wages and limited opportunities for promotion. However, as the trainee workers comprise half of the workforce at HMI, and were not permitted to join a union or participate in industrial disputes, HMI management was able to resist union pressures.Another source of tension within the Chennai plant occurred between Korean managers dispatched to India from HMC in Korea, and local Indian management. An important contributing factor related to the management style displayed by some of the Koreans which the Indians felt was unsympathetic to prevailing tradition and practices in India. They complained that their Korean counterparts frequently communicated with each other in the Korean language which excluded Indians from the decision-making process.For their part, a number of Korean managers claimed that the Ind ians lacked a strong work ethic and therefore had to be more strictly administer in order to achieve the required levels of productivity. gross R. D. Lansbury et al. The Koreans also argued that the caste system interfered with the ef? cient operation of the plant because some Indian workers were appointed by Indian managers to positions in accordance with their caste position rather than on the basis of merit. The Indian management system was regarded as unduly paternalistic by some of the Korean managers.HMI established a Works direction, with the objective of resolving con? icts and differences at the workplace without involving unions. The kit and caboodle committee comprised equal representation from both management and production workers. The Committee met monthly and provided a meeting place in which disagreements over wages and conditions could be discussed and resolved. However, in the absence of a trade union, employees had little bargaining power in regard to manageme nt and the Committee had no means of enforcing its decisions. HMI management tended to use the Committee as a means for disseminating its policies among the workforce.The Committee did not have any jurisdiction to set wages or working conditions. While HMI has remained union-free and had not experienced any major industrial dispute, strikes occurred among component suppliers which were Korean joint ventures with HMI, including Donghee, Pyungbuang, Hwasung and Samrib. The disputes concerned wages, job security and welfare issues. The strikes had adverse effects on HMIs production ef? ciency as many of the companies had a monopoly supplier kin with HMI. The resolution of these disputes often required direct intervention by HMI. Internal Labour Market ArrangementsFrom the initial establishment of the Chennai plant, HMI adopted a dual internal labour market, which differentiated between managerial and production employees in relation to wages, promotion and welfare facilities. Initiall y, there were two classes of employees executive and non-executive. In the executive group there were 11 categories while in the non-executive group there were 14 positions. Within the ? rst year of production, however, the total number of employees increased from 1,503 to 2,320 and there was pressure from the workforce to provide greater wage differentials based on quali? ations. Accordingly, the number of categories in the non-executive ranks was increased from 14 to 18 and two new classi? cations of junior engineer were introduced. The working out in the number of layers within the non-executive group reduced some of the discontent about the limited status differentials in the organizational hierarchy. However, HMI displace restrictions on the number of promotions of workers to higher level categories. This is an important factor in the management of labour within the plant because, as mentioned previously, trainees have only temporary employment status for the ? st three years and are not permitted to join unions. Hence, their opportunities to gain advancement are limited. During the ? rst year of operation, most all senior decision-making positions at HMI were held by Koreans dispatched from HMC. The Korean managers not only were heads of division, with responsibility for all key activities in HMI, but also some were placed at operational level to provide support and advice to middle level Indian managers and to coordinate management activities.As the number Globalization & Employment in Korea one hundred forty-five of total employees increased during the ? rst two years of operation, the ratio of Koreans to Indians in the plant changed from 119 to 146. However, most key roles remained under the control of Koreans. In the production division, the ratio of Koreans to Indians underwent more signi? cant change, from a ratio of 126 in 1998 to 1172 in 2000. This was in keeping with HMIs policy of becoming less reliant on Korean managers at plant level. Disc ussionThe comparison of HMCs operations in three countries demonstrates that there are complex interactions between globalization pressures towards a uniform approach to employment relations across various countries and divergent tendencies at the local level in each country. Although HMC sought to carefully select employers at its plant in Canada who would identify with the companys objectives and follow its procedures, the Canadian workers were willing to challenge management decisions and to utilisation their rights on issues such as health and safety.This was condescension the fact that the Canadian Auto Workers Union was unsuccessful in gaining collective bargaining coverage of the Bromont plant. Although HMC were able to remain non-union, they had a divided workforce and were not able to implement the full range of Hyundai-style human resource policies and practices as planned. Although the closure of the Canadian operation was primarily due to disappointing sales of the So nata model, scurvy employee relations were also a contributing factor to Hyundais failure in Canada.The Indian operations marked an important attempt by Hyundai to relaunch its globalization strategy and demonstrate that it could successfully manufacture and sell overseas-made Hyundai vehicles outside Korea. The employee relations practices which Hyundai implemented in India were more like traditional Korean approaches and appeared to represent a retreat from some of the more progressive ideas which were essay in Canada such as a ? atter hierarchical structure and greater employee participation in decision-making (albeit limited in scope).But the Indian plant was more labour intensive and had lower labour costs, which is similar to the forward stages of auto production in Korea. Unlike the on-going situation in Korea, where HMC is required to negotiate with the union movement (due to both its organizational strength and changes in legislation), Hyundai has so far been able to a void unionization in India. It remains to be seen whether the widespread nature of unionization in the Indian auto industry and political pressures in India may force Hyundai to fling its policy of union avoidance.An alternative strategy, pursued by some other foreign auto companies in India has been to recognize or foster enterprise unions, which may be more cooperative than industry-wide unions. Implications As has been notable in other studies of auto companies, which established transplants outside their home country, there is a strong course towards hybridization both in terms of production methods as well as employment relations. This has been discover in the case of Japanese companies which have 146 R. D. Lansbury et al. established plants in the unite States (see Cutcher-Gershenfeld et al. 1998), but it has also occurred with US auto companies in Canada (Lewchuck et al. , 2001) and European auto companies which have opened plants in other parts of the world (see Boyer e t al. , 1998). It would appear, from the current study, that a similar tendency is occurring within the Hyundai Motor Company as they seek to re-start their overseas production activities in India. A more diversi? ed employee relations strategy, which takes into account the demands of local employees and their unions, may be required if Hyundai is to continue to develop an effective global production system.For its global ambitions to be realized, Hyundai will require a much greater proportion of its manufacturing to be undertaken outside Korea, the development of global supply chains and global coordination of production, marketing and technology development. The experience of Hyundai in Canada and India suggests that employee relations are likely to be an evolving go bad of company-speci? c policies and locally-based practices, depending on the context in which Hyundai is operating. ConclusionsThe experience of the Hyundai Motor Company in India illustrates the complexity of the impact of globalization strategies on employment relations. It supports the hypothesis that there are dynamic interactions between global and local forces, which shape employment relations when a multinational enterprise establishes a production facility in a country outside its home base. Hyundai has applied some of its human resources policies from Korea to India, such as training programmes to reinforce employee loyalty to the company, but it has provided fewer opportunities for employees to be promoted from the shop ? or to higher-level positions within the plant. This has caused resentment among some of the Indian employees who feel that they have limited race prospects in the company. Hyundai has also successfully avoided unionization contempt the fact that unions have collective agreements with most local automobile producers in India. It remains to be seen whether the Indian unions will be able to apply pressure successfully to the company to bargain collectively or persua de the government to require Hyundai to negotiate with the union over the wages and conditions of its employees.Acknowledgements The authors wish to acknowledge the Australian Research Council (ARC) for their award of an ARC Discovery distribute for this research project and the helpful comments of the reviewers and editors. References Amsden, A. (1989) Asias contiguous Giant South Korea and Late Industrialization (New York Oxford University Press). Bae, K. H. (1987) Automobile Workers in Korea (Seoul Seoul National University Press). Bhaktavatsala, R. C. (1992) The Indian automobile industry patterns of expansion, entry and performance, Management, Journal, 5(2), pp. 7 111. Globalization & Employment in Korea 147 Boyer, R. (1998) crisscross and models of production Geography, history and theory, in R. Boyer, E. Cherron, U. Jurgens & S. Tolliday (Eds) Between Imitation and Innovation The Transfer and Hybridization of Production Models in the International Automobile Industry (Oxf ord Oxford University Press). Cho, H. J. (1999) The employment adjustment of Hyundai Motor Company a research focus on corporate-level labour relations, Korean Journal of Labour Studies, 5(1), pp. 6396 (in Korean). Choi, J. 1989) Labour and the Authoritarian State Labour Unions in South Korean Manufacturing Industries (Seoul Korea University Press). Cutcher-Gershenfeld, J. et al. (1998) Knowledge-Driven Work Unexpected Lessons from Japanese and United States Work Practices (New York Oxford University Press). Frenkel, S. (1993) Workplace relations in the global corporation, in S. Frenkel & J. Harrod (Eds) Industrialization and Labour Relations, pp. 3763 (Ithaca, NY Cornell ILR Press). Hill, R. C. & Lee, Y. C. (1998) Japanese multinationals in East Asian development the case of the auto industry, in L.Sklair (Ed. ) Capitalism and Development (London Routledge). Janelli, R. & Yim, D. (1993) Making Capitalism the mixer and Cultural Construction of a Korean Conglomerate (Palo Alto Stanf ord University Press). Kalleberg, A. (1990) The comparative study of business organizations and their employees, in C. Calhoun (Ed. ) Comparative Social Research A Research Annual, pp. 153 175 (Greenwich, CT JAI Press). Kearney, R. P. (1991) Warrior Worker History and Challenge of South Koreas Economic Miracle (New York Henry Holt & Coy). Kochan, T. A. , Lansbury, R. D. & MacDuf? e, J. P. 1997) After Lean Production Evolving Employment Relations in the World Auto Industry (Ithaca, NY Cornell University Press). Kwon, S. H. & ODonnell, M. (1999) Repression and Struggle the State, the Chaebol and the Independent quite a little Unions in South Korea, Journal of Industrial Relations, 41(2), pp. 272 293. Kwon, S. H. & ODonnell, M. (2000) The Chaebol and Labour in Korea (London Routledge). Lansbury, R. D. (2002) The impact of globalization on employment relations the automobile and banking industries in Australia and Korea, The bare of Comparative Labour Relations, 45, pp. 16. Lewchuck, W. , Stewart, P. & Yates, C. (2001) Quality of worklife in the automobile industry A CanadaUK comparative study, New Technology, Work and Employment, 16(2), pp. 72 87. Ogle, G. E. (1990) South Korea Dissent within the Economic Miracle (London Zed Books). Oliver, N. & Wilkinson, B. (1989) Japanese manufacturing techniques and personnel and industrial relations practices in Britain Evidence and implications, British Journal of Industrial Relations, 27(1), pp. 73 91. Song, L. 1998) The process of globalization of the Korean automobile industry, Economic and Management Analysis, 18(1), pp. 2035. Steers, R. M. , Shin, Y. K. & Ungson, R. (1989) The Chaebol Koreas New Industrial Relations Might (New York Harper & Row). Teal, G. (1995) Korean management, corporate culture and systems of labour control between South Korea and North America, Culture, 15(2), pp. 85103. Womack, J. P. , Jones, D. T. & Roos, D. (1990) The Machine that Changed the World (New York Macmillan).