KEF report highlights Toyota's 'cooperative' labor, management relationship

As Korean companies struggle to fend off unions' demand to fix the company operating profit to employee bonuses, the Korea Enterprises Federation (KEF) wants domestic companies — and especially their unions — to take the example of Japanese carmaker Toyota and its "cooperative" relationship with its union.

In a report released Monday, the employers' coalition highlighted an unusual scene from Toyota's wage talks this year: the union, rather than management, pledging to raise productivity.

"We are determined to raise fundamental productivity and connect our daily actions to clear results," said Keisuke Kito, chairman of the Toyota labor union, at a labor-management council in March.

The Korean report pointed to what it described as problems in recent labor relations in Korea: bargaining focused on dividing up company profits, which it termed "distributive bargaining"; confusion following the revised Trade Union Act, known as the "Yellow Envelope" law; and what it called widespread strikes and militant action. Toyota's approach, the KEF said, "offers a lesson."

At Toyota's first council in February, Kito acknowledged the company's troubles.

"Quality problems have frequently halted production and delayed projects, causing great inconvenience to our customers," Kito said. 

"If anything stands in the way of transformation, we will re-examine it without exception."

He added that fixed costs would only keep rising if the company stuck to its current ways, and that it had lacked the resolve to change itself.

The KEF agreed with the comment. 

“A shared understanding that a high-cost structure not premised on productivity improvement leads to the mutual destruction of both labor and management,” it said in the report. 

The proposal to embrace AI and create new value also came first from Toyota's union. 

"Rather than using AI as just a tool, we are determined to change everything from scratch, asking what skills I can contribute and what value I can add," said Daiki Akiyama, vice chairman of the Toyota union. 

Toyota's management, in turn, resolved to move from the annual spring struggle over wages toward what it called a "spring cooperation," through which the company and the labor group decided to work together as one. 

The picture is quite different from Toyota's Korean counterpart, Hyundai Motor, the largest auto company in Korea.

Hyundai Motor Group, which competes with Toyota, the world's largest automaker, faces a rockier path. Its first wage negotiations since the "Yellow Envelope" law took effect, which began on March 10, are expected to be difficult. The Hyundai Motor union is demanding performance pay equal to 30 percent of net profit, an 800 percent bonus, a 4.5-day workweek and job guarantees if AI is introduced.

Based on Hyundai Motor's 2025 net profit of 10.4 trillion won ($6.9 billion), the demand for a 30 percent share would come to more than 3 trillion won. Both Toyota and Hyundai Motor set record revenue last year, but their operating profit fell, and both face mounting spending on electrification and self-driving technology.

Similar demands are spreading across organized labor. Unions at Kia, HD Hyundai Heavy Industries and LG U+ have called for performance pay worth 30 percent of operating profit, while Kakao's union has sought 10 percent. The push extends to the struggling petrochemical and steel sectors: The LG Chem union wants dividend income from its subsidiary, LG Energy Solution, shared with employees, and the Hyundai Steel union is reportedly seeking a 150 percent increase in performance pay.

"Cases of demands for excessive profit-sharing are increasing, and the fact that even at the world's top automaker, it is the union that first considers a survival strategy carries great implications for our labor relations," said Lee Dong-geun, standing vice chairman of the KEF.

"Labor and management have a social responsibility for how to lead the next generation's labor market, and discussing only how to divide the gains lacks legitimacy," said Oh Gye-teak, a senior fellow at the Korea Labor Institute. "We must hold that discussion together: how to survive amid change."

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY NAM YOON-SEO, LEE SU-JEONG [[email protected]]