SEOUL -- Renault is considering reducing production in South Korea over ongoing labor strikes, a fresh blow to the country as an auto export hub following a General Motors plant shutdown announced last year.
South Korean unit Renault Samsung Motors faces the prospect of losing a contract that accounted for half of its production last year. Renault executive Jose-Vicente de los Mozos Obispo said in a video message early this month that if unionized workers at Renault Samsung continue to strike, it will become difficult to discuss the allocation of follow-up production volume.
This was a reference to output of the Rogue sport utility vehicle for Japanese alliance partner Nissan Motor. Renault Samsung, 80%-owned by the French automaker, has built the model in Busan since 2014. Production amounted to 107,000 or so vehicles last year out of the plant's total output of just over 210,000 units.
The sourcing contract is to expire in September. The video message can be seen as a warning that the plant will lose the contract in October if the strike continues, undermining jobs at Renault Samsung.
These developments involving foreign automakers come amid shifting trade dynamics as competing bilateral agreements take effect, further stoking unease in South Korea that the country is losing its edge as an export base.
Renault Samsung workers have staged 136 hours of strikes demanding higher pay since October, a company source said, with the automaker claiming that it has taken a 140 billion won ($124 million) hit as a result.
The strikes -- the first since 2014 -- came as the union takes a hard line under a new leader from its umbrella organization with close ties to labor at Hyundai Motor. The Renault Samsung union is not backing down after the video message, saying it may step up the strike.
South Korean production of the Rogue began as a complement to American production. Under a bilateral free trade agreement, shipping vehicles from South Korea to the U.S. offered a tariff advantage over shipping from Japan. But now, as automakers increase local production and the American market slows, the benefit of shipping all the way from South Korea has diminished.
With the economic partnership agreement between Japan and the European Union finally in force, South Korea's relative advantage will fade as the EU moves to abolish tariffs on Japanese autos. The possibility of additional American tariffs on vehicles from South Korea is another headwind.
The old GM assembly plant had stopped functioning as an export hub for Asian markets. South Korea's car exports decreased 3% in 2018.
Automotive-sector organized labor is a backer of South Korean President Moon Jae-in's administration. But its defiance has prompted some in the administration to turn a cold shoulder.