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[KH Explains] Hyundai faces hurdles in acquiring GM’s Indian plant
1,000 former GM’s unionized workers demand to be employed by the carmakerBy Byun Hye-jin
Published : Aug. 6, 2023 - 14:38
With global carmakers, mainly Tesla, making forays into the growing Indian market, Hyundai Motor Group is seeking to acquire General Motors’ manufacturing plant there -- but faces challenges in its efforts.
The world’s third-largest carmaker plans to complete the acquisition of GM’s Indian plant in Talegaon by this year, however, is still facing opposition from some 1,000 workers formerly employed by the US automaker.
On whether the terms of the deal to acquire the plant includes rehiring workers who were laid off when the plant closed, an official from Hyundai Motor Group declined to comment citing confidentiality on July 31.
But a source with firsthand knowledge said, “The company is not ruling out the possibility of hiring entirely new workers -- preferably low-cost labor force.”
According to media reports, GM’s unionized workers have been demanding to be part of the proposed transfer deal and employed by the new owner of the plant. A former union worker cited by India-based news outlet Financial Express on June 29 claimed that Hyundai is not communicating with the union directly and is not keen on employing the workers.
GM had offered voluntary redundancy for employees before shutting down manufacturing in 2020, however, the union rejected the severance package and brought the matter to court. GM says it remains confident on its legal position regarding the workers, and has terminated every employment arrangement with them.
But after the Supreme Court of India ordered the US carmaker to pay 50 percent salary to the employees in October last year, GM has refused to comply.
Sources say Hyundai could be in a bind, since the term sheet signed by Hyundai Motor India and General Motors India is likely to stir controversy.
The term sheet covers the proposed acquisition of land and buildings and certain machinery and equipment for manufacturing situated at GM’s Talegaon plant.
It also stipulates that both parties are required to receive approval from relevant government authorities and all the stakeholders related to the acquisition. But it is unclear if the stakeholders include former employees, leaving room for the union workers to push for their demands.
Experts say Hyundai would prefer to start operation without the burden of hard-line unionized workers.
“Even if the carmaker has a knack for dealing with union strongholds in Korea, it is not easy to start business with them in a foreign country. Although it might take some time to hire new workers and train them, it’s better to start with clean slate,” said Kim Pil-su, a car engineering professor at Daelim University. “Another option could be hiring a mix of former employees and new workers, however, I don’t think the union would accept that.”
But given that Tesla and other rivals are creeping their presence in the booming Indian automotive market, Hyundai is likely to consider every measure necessary including providing inducements for the Indian government to settle the union issue, Kim added.
At the end of July, Tesla CEO Elon Musk reportedly met with Piyush Goyal, minister of commerce and industry of India, to discuss building an electric vehicle manufacturing plant in India. The plant is expected to produce budget-friendly Tesla EVs priced around $24,000, according to a news report from Reuters on July 24.
With the acquisition of GM’s Talegaon plant, Hyundai is also mulling over expanding its EV production in India. By 2028, it plans to sell a total of six electric car lineups including the flagship Ioniq 5, after gradually transforming the internal combustion engine car manufacturing lines into EV production lines in either the existing Chennai plant in Tamil Nadu state of India or Talegaon plant. Hyundai’s annual production capacity in its two plants is projected to surpass 1 million units.
The carmaker also signed a memorandum of understanding with Tamil Nadu in May that it will inject 200 billion rupees ($2.4 billion) for the next 10 years to set up a battery pack assembly plant there.
“India is an emerging automotive market, with one of the largest populations, that could replace China, where global carmakers are withdrawing their businesses,” the company official said. “The car market has been showing huge demand for internal combustion engine cars and hybrid vehicles. We see great potential for EVs as well.”
As of last year, Hyundai and its smaller affiliate Kia sold a total of 807,067 units in India, posting 21.1 percent market share. Its share came to 21.3 percent during the January-June period this year.
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