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Business Empty shipyard and suicides as 'Hyundai Town' grapples with grim future
FILE PHOTO: A worker fixes the Hyundai logo on a vehicle at a plant of Hyundai Motor in Asan, south of Seoul, February 9, 2012. REUTERS/Lee Jae-Won/File Photo
13 Aug 2018 10:06AM (Updated: 13 Aug 2018 10:42AM)
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ULSAN, South Korea: When Lee Dong-hee came to Ulsan to work for Hyundai Heavy Industries five years ago, shipyards in the city known as Hyundai Town operated day and night and workers could make triple South Korea's annual average salary.
But the 52-year-old was laid off in January, joining some 27,000 workers and subcontractors who lost their jobs at Hyundai Heavy between 2015 and 2017 as ship orders plunged.
To support their family, Lee's wife took a minimum wage job at a Hyundai Motor supplier. His 20-year-old daughter, who entered a Hyundai Heavy-affiliated university hoping to land a job in Ulsan, is now looking for work elsewhere.
The Lee family's fortunes mirror the decline of Ulsan, which is now reeling from Chinese competition, rising labor costs and its over-reliance on Hyundai - one of the giant, family-run conglomerates or chaebol that dominate South Korea.
Generations of Hyundai workers like Lee powered South Korea's transformation from the ashes of the 1950-53 Korean War to an industrial and manufacturing powerhouse, making the southeastern port of Ulsan the country's richest city by 2007.
But some experts say the chaebols have now become complacent and risk averse, failing to keep pace with their overseas competitors.
South Korea's focus on exports has also made Asia's fourth-largest economy vulnerable to growing protectionism by major trade partners and other external shocks.
"Hyundai was everything to me. I feel hopeless,” Lee said at his apartment, a high-rise complex popular with Hyundai Motor workers 10km from the automaker's factory.
With young people fleeing in search of jobs, Ulsan is now the fastest-aging city in the country, according to Statistics Korea. The city's population of 1.1 million has more than quadrupled since 1970, but fell for the first time in 2016 even as population grew in the rest of the country.
FILE PHOTO: A worker carries construction materials as he walks past a ship which is currently under construction at Hyundai Heavy Industries' Shipyard in Ulsan, South Korea, May 13, 2015. REUTERS/Kim Hong-Ji/File Photo
ONCE A PROSPEROUS COMPANY TOWN
In many ways, the challenges facing Ulsan mirror those faced in the American Midwest in the 1970s and 1980s, when the once prosperous industrial heartland was hit by massive job and population losses.
Some experts and industry executive warn Ulsan - home to the world's biggest shipbuilder and largest carmaking complex - might be South Korea's 'Rust Belt' in the making.
“It could be worse here, since it's all about Hyundai and its suppliers," said Mo Jong-ryn, a professor of international political economics at Yonsei University in Seoul. "There is no alternative."
Legendary businessman Chung Ju-yung founded Hyundai Motor in Ulsan in 1967 and Hyundai Heavy six years later, turning the small fishing village known for whale hunting into a giant company town.
For decades, job seekers flocked to the city, drawn by high wages, company-subsidized housing and generous benefits.
Hyundai's dominance is still keenly felt. Workers wearing gray Hyundai uniforms drive Hyundai cars, shop at Hyundai department stores, live in Hyundai apartments and go to Hyundai hospitals for medical service. Their children go to Hyundai schools and universities.
In the wake of the downturn, Hyundai Heavy has been selling assets such an employees’ dormitory, and a large foreign community complex it used for clients such as BP and Exxon Mobil and their families, officials say. The foreigners' complex featured townhouses, a golf course, a swimming pool and school.
A spokesman said Hyundai Heavy was doing its utmost to "normalize our company", working with labor unions to address a lack of work and an idled workforce.
Ripples from Hyundai's struggles spread throughout Ulsan.
Eom Soon-ui runs a small noodle place in a traditional market blocks away from Hyundai Heavy's headquarters. One recent workday, the market was mostly empty, with about a dozen restaurants as well as uniform shops catering to shipyard workers closed.
“Hyundai makes or breaks for merchants like us. They're doing poorly, so I'm struggling to make ends meet," she said.
Ulsan accounted for 12 per cent of South Korea's exports last year, the lowest since 2000 and down from its peak of 19 per cent in 2008, according to customs data.
The city also has seen a rising number of suicides and now has the highest suicide rate in the country for those aged between 25 and 29, according to Statistics Korea.
Ulsan University Hospital, run by Hyundai Heavy, recorded 182 suicide attempts in the first half of this year, compared to about 150 a year earlier, a hospital official said.
Taxi drivers have been told by police not to drop people off on Ulsan's newly built bridge after three people killed themselves there in just one month.
"People believed that if they work hard, they will be better off, and if their children study hard, they will be better off," said Park Sang-hoon, an official at an Ulsan suicide prevention center. "Confronting a different reality now, it seems that many of them are getting to a point of hopelessness, and some are even making extreme choices."
A worker works at an assembly line of Hyundai Motor's plant in Asan, South Korea, Jan 27, 2016. (Photo: Reuters/Kim Hong-Ji)
DOMINANT AT HOME, BUT FALTERING ABROAD
After massive shipbuilding job losses, auto workers fear it could be their turn next.
Hyundai Motor has been already moving some production offshore, and an internal forecast seen by Reuters shows domestic output is expected to fall to 37 per cent this year, down from nearly 80 per cent in 2004.
Executives say that's necessary because of high labor costs and strong unions at home.
But workers say many of Hyundai's problems are its own making, like failing to forecast a SUV boom in the key US market and missing the shift to electric cars.
Hyundai Motors declined to comment for this story. Earlier this year, it pledged to hire 45,000 across the group over the next five years and invest heavily in new businesses including “wearable robots” and artificial intelligence.
However, some experts say South Korea's reliance on a few powerful chaebol is holding the country back.
South Korea’s top 10 conglomerates had revenue equivalent to 66 percent of the country's gross domestic product in 2017. By comparison, the combined revenue of America's top 500 companies was 65 per cent of US GDP, according to Fortune magazine's annual survey last year.
“South Korea’s chaebol have been complacent,” said Lee Dong-gull, the chairman of state-run Korea Development Bank.
Because of their near monopolistic market positions at home, conglomerates have been reluctant to take risks and slower to innovate, Lee said.
Faltering in key overseas markets, South Korea forecasts export growth will slow to 5.3 per cent in 2018 and 2.5 per cent next year, from 15.8 per cent last year.
FILE PHOTO: The logo of Hyundai Motor is seen at its dealership in Seoul, South Korea, April 26, 2017. REUTERS/Kim Hong-Ji
NO LONGER A PARADISE
That means more pain for Ulsan and other exports hubs.
South Korean President Moon designated Ulsan and several other cities as “industrial crisis zones" in May, setting aside 1 trillion won (US$890 million) this year to support affected workers and suppliers, and to promote new industries.
Moon says the chaebol-oriented economic policy has reached its limit, and has widened the gap between haves and have-nots.
Under a new policy of “innovative growth", Seoul is boosting investment in fuel cells and self-driving cars, “smart factories” and drones, as well as artificial intelligence, the internet of the things and big data.
Long-time Hyundai men say they aren't feeling benefits of the new policy.
Lee, the former Hyundai Heavy worker, learned painting and molding to do home interior work, but is struggling to find a job because the downturn has also hit the real estate sector.
Ha MH, who came to Ulsan in 1982, said he is leaving Hyundai Heavy in August after 36 years, because the company's backlog for offshore platforms has run dry.
“Foreign inspectors from Scotland and elsewhere who used to work here in good old days still call Ulsan a paradise," Ha said. "All of my friends have left, and I am the last man standing."
Source: Reuters/ng
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