Global Challenges and Local Responses: Trade Unions in the Korean and Malaysian Auto Industries

Wad, Peter Working Paper Global Challenges and Local Responses: Trade Unions in the Korean and Malaysian Auto Industries Copenhagen Discussion Papers, No. 2005-3 Provided in Cooperation with: Asia Research Community (ARC), Copenhagen Business School (CBS) Suggested Citation: Wad, Peter (2005) : Global Challenges and Local Responses: Trade Unions in the Korean and Malaysian Auto Industries, Copenhagen Discussion Papers, No. 2005-3, Copenhagen Business School (CBS), Asia Research Centre (ARC), Frederiksberg, https://hdl.handle.net/10398/7410 This Version is available at: https://hdl.handle.net/10419/208603 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/3.0/ ASIA RESEARCH CENTRE COPENHAGEN DISCUSSION PAPERS 3 2005 June Global Challenges and Local Responses: Trade Unions in the Korean and Malaysian Auto Industries PETER WAD Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 1 Global Challenges and Local Responses: Trade Unions in the Korean and Malaysian Auto Industries1 Associate Professor Peter Wad Department of Intercultural Communication and Management Copenhagen Business School [email protected] ABSTRACT The paper aims to address the question whether the dynamic of autoworker unionism in South Korea and Malaysia was conditioned by, and eventually also influenced the globalization processes in the local auto industry? The conclusion is a contextualized "yes", and the core argument is the following: The financial crisis in 1997 was the dramatic peak of financial globalization in East Asia in the 1990s, and it did accelerate the existing trend in Korea towards centralized unionism in the auto industry, while it suspended the trend in the Malaysian auto industry towards decentralized unionism. Although the Korean and Malaysian unions were affected by the financial crisis from different structural and strategic positions, and were exposed to different national policies and corporate strategies of crisis management, the Korean unions and Malaysian unions generally followed, respectively, a more radical and militant and a more pragmatic and moderate strategy. In the global-local perspective we face two paradoxes. The first paradox is that in spite of the difference in union ideology, the outcome in terms of industrial relations (IR) institutions was rather similar in the sense that the auto industry contained a mixture of industrial and enterprise unions and formal or informal federations of these unions, and that collective bargaining was by and large undertaken bilaterally at the enterprise level. This situation was generated by a dynamic, which took the Malaysian system down from a centralized IR system within the low technology assembly industry (the globally subordinated local OEMs) to a rather decentralized IR system within the SOE-MNC controlled industry. The Korean system became more centralized through the confrontations between radical enterprise unions and authoritarian employers and authorities within an auto industry, which over time become much more indigenized, technologically advanced, export-oriented and diversified into multiple auto manufacturers and an under-wood of component suppliers. Yet, in both auto industries the large enterprise unions resisted organizational centralization, which could impede their autonomy. Due to the strength of unions of the market leading firms a breakthrough did happen neither in Korea nor in Malaysia, although the Koreans were a step ahead of the Malaysians having established a federation of metalworkers unions, including Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 2 the important autoworkers unions. The second paradox is that the radicalism of the Korean autoworker unions was maintained during 1990s globalization of the auto industry, while radicalism was abandoned by the Malaysian autoworker unions in favor of union pragmatism, when the indigenization of the Malaysian auto industry unfolded since the early 1980s and a local auto supplier industry had been formed. This cross-country difference is partly explained by the different position held by the Korean and Malaysian auto companies in the global and local auto value chain. The radicalism and effectiveness of Korean autoworker unions sustained the development of dynamic efficiency among Korean auto manufacturing firms. In the same way, the intra-industry differences in wages and working conditions among auto manufacturing firms and components supplier firms were also related to the stratification of the domestic auto value chain, and this uneven distribution of benefits created obstacles of centralized unionization and collective bargaining. The centralized IR system in Malaysia evolved in an auto industry composed primarily of firms assembling imported CKD kits of components. The inequality of employment conditions between auto manufacturers and component suppliers was a driver of the strategy of centralized unionism and collective bargaining in Korea, while the inequality was not perceived as that significant by the Malaysian industrial union, since they had been dealing with these problems by the early 1990s. Keywords: Globalisation, trade unions, automobile industry, global value chain theory, East Asia, Malaysia, South Korea. Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 3 List of abbreviations AFTA: Asean Free Trade Area CB: Collective bargaining. CA: Collective agreement CBU: Completely build up (automobile). CKD: Completely knocked down (set of automobile components). DMC: Daewoo Motors. EU: Enterprise union. FDI: Foreign direct investment. FKTU: Federation of Korean Trade Unions GCC: Global Commodity Chain. GERPISA: Permanent group for the study of the automobile industry and its employees. GM: General Motors GVC: Global Value Chain. HMC: Hyundai Motor Co. IMVP: International Motor Vehicle Program. IR: Industrial relations, i.e. relations between employers’ associations, employees’ union and state agencies. IU: Industrial union. JIT: Just in time. JV: Joint venture KMC: Kia Motors. IMFmetal: International Metalworkers’ Federation (IMF, yet her called IMFmetal to distinguish it from the International Financial Fund, IMF). IR: Industrial relations (between trade unions and employers/associations and the authorites) ISA: Internal Security Act, Malaysia KCTU: Korean Confederation of Trade Unions KMWF: Korean Metal Workers Federation. KMWU: Korean Metal Workers Union. LDC: Less Developed Country (a developing country) LV: Light vehicle MMC: Mitsubishi Motor Co. MNC: Multinational corporation MTUC: Malaysian Trades Union Congress NGO: Non-governmental organization. NUTEAIW: National Union of Transport Equipment and Allied Industries Workers (before 1990 called TEAIEU: Transport Equipment and Allied Industries Employees Union). OEM: Original Equipment Manufacturing. ODM: Original Design Manufacturing. OBM: Original Brand Manufacturing. OES: Original Equipment Supplier. ODS: Original Design Supplier. OBS: Original Brand Supplier. SOE: State-owned enterprise TRIM: Trade-Related Investment Measures Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 4 “Trade union experience is national, but the challenge is global!” Peter Unterweger, International Metalworkers’ Federation, Bangkok 2002. INTRODUCTION In the literature on economic globalization and restructuring in East Asia, few studies address the reactions and impacts of trade unions on these changes. The article aims to analyze how trade unions in the Korean and Malaysian automobile industries (auto industries hereafter) respond to industrial changes and organize and act collectively in order to influence employment conditions, industrial relations, corporate restructuring and broader social transformations before, during and after the East Asian financial crisis 1997-99. While entering the crisis from different structural and strategic positions and being exposed to different national policies and corporate strategies of crisis management the Korean auto unions overall adopted a more radical and militant strategy while the Malaysian counterpart employed a more pragmatic and moderate strategy. This chapter argues that this difference was mainly due to the fact that opportunities for increasing real benefits through unionization and industrial action were completely different between the Korean and Malaysian auto industries. Above all, they were located in very different positions in the global value chain: Korean auto companies were much more internationalized and had already reached higher global value chain positions than their Malaysian counterpart. Moreover, the Korean unions enjoyed more political space than Malaysian unions due to the consolidation of political democracy in Korea since the beginning of democratization in 1987. However, this article also argues that both types of union strategy made sense in their particular institutional and historical context, and they eventually contributed to changing the industrial relations of the industry and probably also sustaining or improving nominal wages and working conditions, yet without affecting the corporate structure of the industry. The article relies on primary empirical studies done in 1999 on national auto industries in Korea and Malaysia with Hyundai Motor Company (HMC) and Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 5 Daewoo Motor (DMC) in Korea and Proton and Perodua in Malaysia, and in 2001-2003 on auto workers’ trade unions and federations in both countries, including Korean Metal Workers Federation (KMWF), Korean Metal Workers Union (KMWU), and the Malaysian National Union of Transport Equipment and Allied Industry Workers (NUTEAIW), which all organized employees in the auto industry and beyond. The article is structured as follows: In section 2, we develop a theoretical framework to explain the processes of globalization in the auto industry and put trade unions as part of a globalizing production system. The global and local dimensions of the Korean and Malaysian auto industries are outlined in section 3. Then, the industrial relations of the auto industry in Korea and Malaysia before, under and after the East Asian Financial Crisis are described in section 4. In section 5, the dynamics of the trade unionism in the Korean and Malaysian auto industries are explained by investigating its interface with the political economic aspects of globalization and the interaction between labor and capital in the auto industry in a broader context of labor organization and mobilization. Section 6 winds up the argument. Global automobile production, state policy and trade unionism: a theoretical framework The auto industry has been recognized as the ‘industry of industries’ (Dicken 2003, p. 355). When this notion became outdated and obsolete in the industrial North in the 1970s due among other things to increasing internationalization and ‘maturity’ of auto markets it gained new popularity in developing countries, not least in Korea in the 1970s and in Malaysia in the 1980s. When industrial internationalization during the 1990s turned into regionalization with free trade regions like the EU, NAFTA, and AFTA on the one hand and MNC-driven global production networks on the other hand, global auto production stagnated with an over-capacity of 50% to be followed by a brutal worldwide consolidation among MNCs with plant closures, acquisitions, rationalization, relocation, outsourcing etc. Due to the combination of globalization and ‘economic Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 6 nationalism’ some developing countries like Korea and Malaysia pursued a continued expansion of their domestic auto manufacturing capacity (Wad 2001). Recently, this counter-trend in developing countries has even accelerated with MNCs rallying for the expanding auto markets in India and mainland China. Gerry Gereffi (1999) and others (Humphrey & Memedovic 2003) have argued that the internationalization process of various industries should be understood as a global commodity chain (GCC) driven by lead firms. In the case of the automobile industry, Gereffi found a producer-driven global commodity chain. Such a chain is characterized by an inter-firm, corporate power structure, in which the lead chain firms are the final original equipment manufacturers (OEMs). More specifically, MNCs with own brand manufacturing of automobiles are the lead chain firms at the global level, while foreign subsidiaries, associate companies or licensed domestic firms may be lead firms at the national level2. The global auto chain is producer-driven in the sense that the chain is controlled by the global OEMs governing the activities of the components supplier companies as well as distributors and dealers. As such, the global auto chain differs both from a classic market situation, which may only be found in the aftermarket for non-original component equipment and second-hand automobiles, and from global buyer-driven chains to be found, for example in the global garment industry, where big retailers govern the global chain due to their control over design and marketing. The global commodity chain is also a global value chain, which is stratified in accordance with the distribution of value adding activities and yields throughout the various links and controlled (governed) by the lead chain firms. R&D, design, marketing, branding and financing may all be functions, which add more value compared to, for example, component manufacturing and auto vehicle assembling. The globalization of the auto industry has generated a global structure whereby various chain leaders (OEMs) have established a certain hierarchy of component suppliers delivering whole systems or modules (½ tiers suppliers), advanced components eventually involving design collaboration with the OEM (1st tier suppliers), more simple components of international standard Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 7 (2nd tier suppliers), simple components of local standards (3rd tier suppliers) etc. With the principle of “build-where-you-sell” and regional market integration, chain leaders will ask their key suppliers (½ tier or 1st tier suppliers) to follow them into new markets through FDI (“follow sourcing”) where they again may impact on local auto firms by way of undercutting, acquiring or forming joint venture. Evidence indicates that linkages between foreign OEMs and local auto suppliers may upgrade local firms’ capabilities in terms of productivity and product variety, but seldom in terms of product design and R&D. Hence, local firms face problems of vertical mobility within the OEM supplier hierarchy from lower tier status to 1st tier and ½ tier status and by implication to higher value adding activities (Wad 2004b). Within the particular segments we do also find so-called market leaders, which are the dominant producers of automobiles in a particular market segment. In Korea HMC has been the market leader, and in Malaysia Proton rapidly rose to a dominant market position in the mid-size segment. Worldwide, GM was for long a market leader in non-luxury car segments, while MercedesBenz dominated the luxury car segment. In fact, competition within the global and national auto chains takes place as a competition between particular auto chains lead by the particular OEM, eventually allied with other transnational ½ tier and 1st tier suppliers. The labor force employed by the various auto enterprises is locked into this global production structure, and this stratified value system influences very much the options for employment, income, working environment, training etc. Lead chain firms will normally earn more revenue than other firms upstream and downstream, and the market leaders will also make more profit than market followers. This difference in value adding spills over into the space for wage concessions and overall improvement of working conditions (Sturgeon & Florida 2000). Finally, trade unions also face very different employers and bargaining strategies depending on their position within the global production system, and unionizing and uniting the union organizations are also influenced by this global production system. Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 14 manufacturers. The financial crisis 1997-98 changed this planned path of Malaysian auto industry. The Malaysian government rescued the national auto companies and then proceeded to do the same for the non-national auto companies in 1998. The Malaysian auto industry bottomed out in 1998 and recovered as of from 1999. Proton, being privatized in the mid-1990s, was unable to increase export during and after the crisis3 and it was rescued by the national oil company (Petronas) and ‘re-nationalized’ in 2002 when the government’s investment company (Khazanah Nasional Berhad) increased its share to 33% followed by new expansion of capacity (Proton City) and corporate restructuring. However, new FDI flowed into the auto industry and a major re-organization of the industry happened: Daihatsu obtained 51 percent of Perodua Manufacturing Company after the national car maker had been restructured; Honda Motor substituted its main local partner for another and established a new JV manufacturing facility; HMC established a JV production facility; Toyota Motor gained 51 per cent equity control of UMW-Toyota, its domestic JV; Ford increased its equity in AMIM from 30 per cent to 49 per cent. In the auto supplier industry, foreign auto supplier firms acquired Malaysian firms; for example, German Continental AG took a 51 per cent interest in the Sime Group's tire division (The Star 2003-10-14). In sum, the Malaysian national auto program made huge advances in a protected market in the last two decades, but it failed to become a major exporter like the Korean auto industry, or the auto industry in neighboring Thailand, relying on MNC subsidiaries. By taking a international value chain perspective on the position of Korean and Malaysian auto industries and firms we contend that in a global value chain perspective the Korean industry takes an overall middle position in the global value chain system due to its indigenous brand manufacturing, economies of scale and export performance, while the Malaysian industry holds a position in the low end due to export failure, weak indigenous brand manufacturing and protected home market. The lead manufacturers in their respective home markets are HMC and Proton, but Proton’s domestic market Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 15 share has been declining (Asian Automotive Business Review, July, 2002; Proton 2003:34). Moreover, both the Korean and the Malaysian auto industries started as internationally subordinated industries, based on MNC equity or technology control, but they both underwent a process of indigenization, building up national auto firms, before they entered a process of outward internationalization through export and FDI. In the East Asian post-crisis period since 1997, a new phase of inward internationalization began, driven by local reform policies and the ongoing globalization of the auto industry. The question is, then, how the structural position and changing relations of the Korean and Malaysian auto industries and firms affected the development of trade unionism in Korea and Malaysia, and vice versa? In order to answer this question, we must first describe how the Korean and Malaysian autoworkers unions evolved with the development of the auto industries. Trade unionism in Korean and Malaysian auto industries and firms The Korean and Malaysian auto unions changed over time in terms of union ideology, union structure and collective bargaining, and they turned out to have rather different concepts of unionism but relatively similar IR systems at the turn of the 21st century! The watershed in Korean trade unionism was the ‘Great Labor Struggle’ in 1987, when as new democratic trade unions emerged in the manufacturing sector, including the auto industry (Koo 2001). Before 1987, unions were found at Kia and DMC from the late 1960s, with the DCM union being companycontrolled until 1985, when the first strike in a chaebol generated a new democratic new, while the Kia union and management were collaborating from the early 1980s due to a severe financial situation and government pressure (Lee 2003, p. 327). The new democratic unions, including the HMC union, went on to form wider alliances, networks and federations and a national labor center. In 1990 the democratic unions in the Hyundai Group formed the Alliance of Trade Unions in Hyundai (ATU Hyundai) inspiring other chaebol unions to do the same (Sohn 2002). At the same time, the National Alliance of Trade Unions Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 16 (NATU) was formed based on 17 regional associations of trade unions, initiated in the southern part of Korea and comprising enterprise unions in smalland medium-size enterprises (SMEs). The General Union Federation of Metal Working Industry (GUCMI) and the National Federation of Shipbuilding Trade Unions were established in 1994. In 1995, the National Federation of Auto Assembly Industry Trade Unions (NFATU) emerged; it included unions in assembly companies of Hyundai, Kia, Daewoo, Ssangyong, and Asia Motor. In 1996, the GUCMI and NFATU established the National Democratic Metal Industry Trade Unions (NDMTUA)4. These three federations were all affiliated to the democratic labor center, Korean Confederation of Trade Unions (KCTU), when it was established 1995. KCTU had a radical, class-oriented program for the establishment of a democratic-socialist labor movement, based on industrial unions on the one hand and a democratic labor party on the other hand (KCTU 2000). It took a national general strike from December1996 to January 1997 against labor reform and the financial crisis during 1997-98 to return labor to the center stage of Korean politics (Lee & Lee 2001). These events also created a strong momentum to organize an encompassing federation of metal industry unions, including the auto manufacturing unions. The various union organizations had emerged from the plant level and then associated into two different, looser organizations – one for large firms (mainly chaebols) and one for SMEs. In order to bridge the gab between different trade union organizations, ATU Hyundai proposed to unite the NATU, NFATU and NDMTUA in a single Korean Metal Workers Federation (KMWF). This occurred in February 1998 at the peak of the financial crisis, when the new government formed the Tripartite Commission of government, employers and trade unions centers. The KMWF numbered around 200,000 employees and aimed for the final consolidation into one industrial union with industry-wide collective bargaining authority. The formal centralization of (radical) trade unions in the metal industry took place in 2001 with the establishment of the Korean Metal Workers Union (KMWU). However, this time the big assembler unions were not Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 17 driving the unification process, which was carried through by the KMWF leadership and SME unions. The big assembler unions stood outside the industrial union – even when of all autoworker unions went on strike in solidarity with the DMC union as it struggled against the downsizing and imminent takeover of bankrupt DMC by a foreign auto MNC (KMWF-KCTU, undated). The KMWU initiated regional collective bargaining and supported enterprise based bargaining, but the counterpart was missing, i.e. an employers association among auto manufacturers and suppliers. In Hyundai, the federation of Hyundai unions undertook for the first time common collective negotiation with HMC in 2001. In DMC, the union leaders were expelled from the factory site during the industrial dispute, and the union leadership was handed over to new people who finally accepted that GM acquired DMC after facing threats of bankruptcy, a pro-GM alliance of management, administrative and technical staff, and weak local community support for an ‘old’ industry and plant (see Lee, under review). The sticky point was not only foreign ownership but also that GM refused to acquire the Bupyeong factory – the old plant in Incheon where the first democratic strike took place in a chaebol and the heavy industry in 1985. Samsung Motor was the only auto manufacturer without any kind of independent union organization, being isolated from the autoworkers’ movement by a vigorous anti-union management. In sum, the Korean auto workers unions and other metal worker unions were moving towards a more unified and centralized democratic union structure with intentional regional collective bargaining, but the divide between the big unions especially in the auto industry and the SME unions in the auto component supplier and wider metal industry was difficult to overcome. The HMC union has been at the forefront of radical unionism several times, organizing, mobilizing and acting militantly, but the HMC union has also been divided into several factions, which have different opinions about costs and benefits of giving up autonomy transferring it to the KMWU, i.e. to its headquarters in Seoul and its regional headquarters in Ulsan. At one end, there are the KCTU-convinced activists believing in class solidarity and centralization, Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 18 at the other end there are the unionists criticizing the leaders of KCTU and KMWU for calling strikes all the time for political purposes, without any insight in workplace issues or facing their members in daily working life, nor running the risks of imprisonment due to illegal industrial action. The critics maintain that the top leaders, as former student radicals, take an academic approach to these issues. Moreover, it takes a 2/3 majority to give up autonomy, and the result of the (last) vote did not cross this threshold although a majority of 62 percent voted in favor of joining the KMWU (IMF[metal] IMFNews 2003, No. 3, p.5). Meanwhile, the HMC union kept control of union resources and used them to fight for the interests of the HMC union members, and quite successfully. At HMC the annual wages decreased slightly in 1998 and has increased since then with 4.5 percent in 1999, 8 percent in 2000, 12.9 percent in 20015. In Malaysia, autoworkers were organized in an industrial union in 1971. The National Union of Transport Equipment and Allied Industries Workers (NUTEAIW)6 rapidly turned into a radical union after an internal fight whereby grass-root oriented activists from a car assembler of Ford (AMI) took over the leadership (Das 1991, p. 129). The new union leadership prompted employers to organize an association of assemblers and entering common, centralized mode of collective bargaining in 1973. Centralized collective bargaining expanded in 1975 but did never include the Nissan assembler (Tan Chong), the market leader. Collective bargaining contracted again in 1982 when an important employer (UMW-Toyota) withdrew from the employers’ association and undertook bilateral negotiation with the industrial union in the same way as Tan Chong (Wad 2004a). Hence, a strong centralized IR system prevailed in the Malaysian auto assembly industry for a decade and continued to a lesser degree for the rest of the 1980s. This system began to be decentralized in three ways (Wad 2004a, pp. 246-259). First, the non-national auto employers disbanded in the 1990s, and the industrial union -- having adopted a more pragmatic ideology -- undertook bilateral bargaining with individual employers in the 1990s. Second, enterprise unions emerged in the national sector of state owned enterprises (SOEs) or JV- Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 19 enterprises and established negotiation and collective agreements with their individual employer. Third, two of the larger assemblers’ workforces broke away from the industrial union to form or join enterprise unions in collaboration with their employers. The industrial union counter-acted this downsizing of the union with a unionization drive in the emerging auto supplier industry, and some smaller enterprise unions in auto component supplier firms did even give up and joined the NUTEAIW. Under the financial crisis 1997-99, the Malaysian auto industry faced a dramatic decline in sales followed by reduction of production and employment in 1998: Proton’s sales fell 52 percent, Perodua’s 35 percent and non-national assemblers saw a 78 percent crop; production fell by 57 percent, 43 percent and 85 percent respectively; and employment declined 14 percent, 11 percent and 38 percent, respectively (Wad 2004a, p. 243). Although the unions faced a sharp downturn in jobs, the rate of redundancies was well below the collapse in sales and production. Employment fell 41-47 percentage points less than production in the domain of the three organizations! However, the rescue of job did not match the reduction of remuneration. Overtime was abolished and working hours were reduced. Collective agreements, which were running for at least three years by law, were not renewed downwards but extended unchanged for one year or more. While the industrial union concluded CAs with 10-15 percent wage increases across the board 1994-97 compared to a combined 3-year inflation around 10-12 percent, the NUTEAIW managed to get 5-10 percent salary adjustments in CAs concluded in 1998-99 compared to a similar level of inflation (NUTEAIW, 1997, 2000; Jomo & Lee 2001, p. 236). In addition, CAs gave wage increments and other benefits, so the standard rates did not decrease in absolute terms during the crisis, but the increase was less than inflation increased in the former CA period, hence, real hourly wages were declining. The severe damage to take home pay was, anyway, caused by the reduction in overtime, which had generated a lot extra income in the booming years before the crisis. Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 20 Yet, no legal or illegal strikes at the industry and national level were ever undertaken in the Malaysian auto industry. During and after the financial crisis, only a few wildcat strikes occurred in the unionized sector. Management and unions in general collaborated in order to save jobs both in the national and the non-national sector. Based on field research on three auto manufacturers and two auto suppliers in March 1999, Peetz & Todd (2000, p. 72) reported that the auto manufacturers attempted to adjust in a worker-friendly way during the crisis while outright retrenchment was carried out among auto component suppliers. During the crisis, enterprise unions began networking with one another, and a few also met with the industrial union. The NUTEAIW feared that the in-house unions should give in and lower the terms of employment during the financial crisis. Although the attempt of collective networking faded with economic recovery, the industrial union saw the need to form in the future a federation of auto unions as the autoworkers faced a free trade area among the ASEAN countries (AFTA), which would include automobile trade around 2005. The issue was restated in 2002 and set a mandate for the industrial union to be the secretariat in charge of the formation of a Federation of autoworkers unions. An agreement was reached in 2004 to form a Federation constituted by NUTEAIW and the two important enterprise unions in the auto assembling industry (Proton and Perodua), but the final decision has to be taken by the governing bodies of the unions. In sum, the Malaysian autoworkers began with an industrial union (NUTEAIW) and established fairly quickly centralized collective bargaining with auto assembly companies in the 1970s. After an economic crisis in the mid1980s, state-induced industry restructuring and the rise of enterprise unions in new and dominant assembly companies in the 1980s and the early 1990s the industrial union shifted to pragmatic unionism, halting union decline by organizing the auto supplier industry, recapturing enterprise unions, and adopting bilateral collective negotiations with employers. The Malaysian autoworkers were divided in a radical-turned-pragmatic industrial union and conservative enterprise unions that were concomitant with the state-directed Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 21 indigenization of the auto assembling industry, and this divide was sustained by their alliances with the opposition and the leadership, respectively, in the national labor center, the Malaysian Trades Union Congress (MTUC). The financial crisis and the emerging free trade area of the ASEAN countries forged a new alliance between the Malaysian industrial union and the key enterprise unions agreeing in principle, but not yet in practice, on the formation of a Federation of Malaysian auto unions. All in all, while the Korean auto unions adopted a common radical conception of unionism, the Malaysian auto unions were divided in terms of union ideology (union pragmatism versus conservatism), and while Korean auto unions began as enterprise unions and Malaysian auto workers formed an industrial union from the outset, both Korean and Malaysian unions ended up with a pluralistic union structure which is composed of an industrial union, enterprise unions and a federation (established or agreed upon) and with unions which by and large undertake bilateral collective bargaining with individual employers. Yet, the Korean auto workers are an integrated part of a metal industry based federation and union, while the Malaysian auto workers are part of a more narrow organization of employees within the motor vehicle and component manufacturing industry and join hands with other metal industry workers unions in the IMF (metal)-Malaysia Council. In actual numbers and union density, the KMWU had 126,000 members (2002) within the metal industry, of which most were from the auto industry, while Malaysian auto workers unions had 21,300 members (2002) (Jeong & Wad 2004; Wad 2004c). In terms of union density, the Korean auto workers stayed around 34 percent in 2001 (124,500 union members relative to a workforce around 368,000, Jeong 2003, table 6), while the Malaysian auto workers were as high as 47 percent in 2002 up from 39 percent in 2000 (Wad 2004c, p. 13)! Explaining the dynamics of Korean and Malaysian auto unionism What explains this divergence in union ideology and partial convergence in industrial relations (IR) patterns between Korea and Malaysia at the dawn of the Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 22 twenty-first century? In order to answer this general question, we need to be more specific and ask five questions and relate them to the summary of industry development, state policies and key features of trade unionism (see appendix, table 1). The first question is why the independent Malaysian autoworkers’ union arose much earlier than the independent Korean autoworker unions, although the Korean auto industry was established, expanded and technologically upgraded earlier than the Malaysian counterpart? Korea and Malaysia imported automobiles from the West, before both states established a protectionist trading regime in the 1960s to facilitate import substitution (IS) in the auto industry, at first aiming at achieving higher levels of localization of auto production and later on in order to indigenize ownership, develop the industry technologically, and capture the domestic market before becoming export competitive. The authoritarian Korean government was more successful in IS policies than its Malaysian counterpart and quickly turned the private Korean auto firms towards indigenous management, technological upgrading and export orientation. It secured domestic expansion in the 1970s and export competitiveness in the 1980s by way of keeping wages down through state corporatism, that is, state-directed tight wage policy, enforcing discipline, and suppressing independent labor union activists. The policies were successful but generated a contradiction by producing a mass of repressed and angry workers in the midst of success of their huge companies. Hence, while autoworkers were prevented from forming independent unions for a period, the combined suppression by management and state conditioned a situation, where labor activists became part of the broader democratization movement. The 'Great Labor Struggle' of 1987 to 1990 changed the shop floor power and social status of labor for the better, and workers in the automobile and other heavy industries initiated a radical and militant trade unions movement in opposition to the conservative trade unions which had been organized in the Federation of Korean Trade Unions (FKTU) and co-opted and subordinated by the former authoritarian-repressive developmental state. Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 23 In Malaysia, the auto industry was established and dominated by Western MNCs during the first decade through wholly owned subsidiaries, JVs or franchising and licensing arrangements with local firms. The workforce of the non-national auto industry consisted primarily of Indians and Chinese and so did the membership and leadership of the autoworker union. In a conjuncture of intra-Malaysian tensions (ethnic cleavages), regional conflicts (the Vietnam War), a IR-system of sector unions and centralized collective bargaining in key export and infrastructure industries, which dated back to colonialism and the anti-communist battle in the 1950s, together with an international trend of neoMarxism, the newly formed autoworker industrial union was taken over by grass-root oriented leaders who challenged the hegemony of the employers and also left the pragmatic trade union center (MTUC) in order to build a new radical trade union movement together with other radical unions (Wad 1988, Das 1991). Hence, the Malaysian autoworkers formed a radical trade union very quickly after the start of the Malaysian auto industry, and this industry consisted of low technology OEM firms assembling imported completely knocked down (CKD) kits of components. A component supplier industry did not yet exist. This analysis does also explain the second question, why the independent Malaysian and Korean autoworker unions adopted a radical line from the onset and yet diverged in terms of organizational structure and forms of collective bargaining? The Malaysian autoworker union arose in a "screwdriver" (assembly) industry with unskilled workers within a labor marked organized by industrial unions and in a tense situation of neo-imperialism and ethno-political cleavages, and these conditions facilitated the formation of a radical and industrial union. Moreover, centralized collective bargaining was known in the large plantation industry and in commerce, including companies, which traded in automobiles. The management of the auto assemblers were more or less familiar with centralized bargaining from abroad (e.g. Australia), so it did not take the employers long time to counteract the radical industrial union by establishing their own association for motor vehicle assemblers and accept collective bargaining and agreements. Finally, the state prohibited wide industry Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 30 forced Korean firms to rationalize their organization and invest in technology, quality and training. Hence, the militancy of the new independent and democratic unions generated dynamic efficiency in the Korean auto industry. However, the efficiency was mainly achieved by way of exploiting economies of scale through standardized, mass production (Fordism)(Jeong 2001a). The wages did also increase in the Malaysian auto industry, but economies of scale were only achievable in the national sector in the 1990s. Around the financial crisis, Korean auto workers earned a net hourly wage (US$) of 6.67 in 1997, which increased to 7.12 US$ in 2001 and 9.40 US$ in 2003/04, while their Malaysian counterparts earned 1.81 US$ in 1997, which fell to 0,94 US$ in 2001 (IMFmetal 1998, 2002, 2004; no data on Malaysia 2003/04). In short, the Korean autoworkers earned 3.7 times as much as the Malaysian autoworkers in 1997 and this difference widened to 7.5 times in 2001. Second, the HMC union's battle for the 40-hour, five-day work week in 2003 ended with a victory of the union, thus, setting a benchmark for other unions. In August 2003, HMC concluded a collective agreement with the HMC union, which provided the employees with a 40-hour, five-day work week, an 8.6 percent wage increase for the next year, a performance-based incentive worth two months' wages, an immediate incentive worth one-month's wages, job security, and a labor-management panel to handle the concerns of employees. The collective agreement was approved by 81 percent of the members, the highest majority in the history of the HMC Union7. Moreover, it is the first time in Korea that a 40-hour, five-day workweek was been agreed upon, and it came after a 47-day, on-again, off-again strike by the HMC union8. In Malaysia, the claim for a 40-hour workweek has not been on the agenda in the auto industry since the 1970s. The best hourly working conditions are a 42½-hour workweek, practiced in a few auto assemblers in both the national and non-national sectors. On the contrary, a new situation evolved recently when Honda Motors instituted employment conditions, calling upon employees to work 48 hours per week. Proton's management took up the idea and demanding that working hours be increased at the new factory in ‘green field’ Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 31 Proton City! Moreover, Proton also demanded that Proton employees, who volunteer to relocate to the new workplace, do this without transfer benefits. This move by the management came in a situation where Proton is loosing market shares in Malaysia to Honda, Toyota and HMC, and where the sole national auto manufacturer faces increased competition in the future within the regional free trade area (AFTA). The loyalty of the OEM enterprise unions is increasingly stretched. Hence, the effectiveness of the autoworker unions seems to be much higher in Korea than in Malaysia. The Korean unions pursued a radical and militant strategy, which has paid off so far, in spite of -- or because of -- the Korean auto industry has been globalizing rapidly. The Korean autoworker unions are still in favor of establishing a centralized IR system within the metal industry, although factions within the key enterprise unions in the large auto manufacturing firms are hesitant to give up autonomy, considering the effectiveness of radical and militant enterprise unionism in the past. The Malaysian autoworker unions have also secured higher than average wages in the protected auto industry, which again is in line with the trend in the Malaysian manufacturing sector that unionized companies pay better than non-unionized companies (Standing 1992; Wad 1997). But with creeping regionalization of the Malaysian automobile market, the benefits, achieved through a long process of unionization and collective bargaining lead by the industrial union, are now under pressure. While the industrial union has adopted a more pragmatic ideology, the larger enterprise unions have been under attack from their management, and these pressures may turn the big in-house unions away from a conservative stance towards a more pragmatic ideology. This is reflected in the agreement with the industrial union to form a federation of autoworker unions -- for auto policy reasons, anyway, and in contrast to the Korean unions, which formed the federation as a means to further centralized organization and collective bargaining with the employers. Yet, the federation has been established in Korea, not in Malaysia, and this gives the Korean radical unionists an edge over the Malaysian pragmatic unionists. However, the unions Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 32 in the auto chain leading firms (the OEMs) and especially also in the market leading firms (Korean HMC, Malaysian Proton) are reluctant to give up their autonomy, which have secured them privileged wage and working conditions in the past, either through militant struggles (HMC union) or through statesupported management-union collaboration (Proton union). Finally, the advances of the Democratic Labor Party in Korea compared to the newly merged center-left party, Parti Keadilan Rakyat (PKR), in Malaysia, indicate that the radical Korean trade unions have succeeded in the endeavor to generate an integrated labor movement, which may further labor-friendly IR institutions in Korea and underpin the strength of trade unions at the enterpriseand industry levels. Hence, with the different position in the global value chain and the different political institutions the Korean autoworker unions will probably continue to be radical and militant and achieve centralized unionization, yet without centralized bargaining due to the forces of globalization, while the Malaysian autoworker unions will be more pragmatic and stay pluralistic at the industry level, yet cooperating more in order to influence state auto policy and coordinate collective bargaining at the enterprise level. CONCLUSION Is the dynamic of autoworker unionism in Korea and Malaysia conditioned by, and eventually also influencing the globalization processes in the local auto industry and in the wider political economy of the countries? The answer is a contextualized "yes", and the argument is as follows: The financial crisis in 1997 was the dramatic peak of financial globalization in East Asia in the 1990s, and it did accelerate the existing trend in Korea towards centralized unionism in the auto industry, while it suspended the trend in the Malaysian auto industry towards decentralized unionism. Although the Korean and Malaysian unions were affected by the financial crisis from different structural and strategic positions, and were exposed to Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 33 different national policies and corporate strategies of crisis management, the Korean unions and Malaysian unions generally followed, respectively, a more radical and militant and a more pragmatic and moderate strategy. This difference in union ideology evolved over time, and it is explained by the harsh suppression of workers in the authoritarian, repressive developmental state in Korea, while the Malaysian -- and especially the new Malay -- workers were partly subordinated a hegemonic indigenization policy, which the Malaysian state pursued in the economy in general and in the auto industry in particular. The early radicalism of the Malaysian autoworker union is to be understood in the historic specific conjuncture of neo-imperialism in Southeast Asia and ethno-political tensions in Malaysia. In the global-local perspective we face two paradoxes. The first paradox is that in spite of the difference in union ideology, the outcome in terms of IR institutions was rather similar in the sense that the auto industry contained a mixture of industrial and enterprise unions and formal or informal federations of these unions, and that collective bargaining was by and large undertaken bilaterally at the enterprise level. This situation was generated by a dynamic, which took the Malaysian system down from a centralized IR system within the low technology assembly industry (the globally subordinated local OEMs) to a rather decentralized IR system within the SOE-MNC controlled industry, while the Korean system became more centralized through the confrontations between militant enterprise unions and authoritarian employers and authorities within an auto industry, which over time become much more indigenized, technologically advanced, export-oriented and diversified into multiple auto manufacturers and an under-wood of component suppliers. Yet, in both auto industries the large enterprise unions resisted organizational centralization, which could impede their autonomy, and due to the strength of unions of the market leading firms a breakthrough did happen in neither Korea nor Malaysia, although the Koreans was a step ahead of the Malaysians having established a federation of metalworkers unions, including the important auto workers unions. The second paradox is that the radicalism of the Korean autoworker Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 34 unions was maintained during the 1990s globalization of the auto industry, while radicalism was abandoned by the Malaysian autoworker unions in favor of union pragmatism, when the indigenization of the Malaysian auto industry unfolded since the early 1980s and a local auto supplier industry had been formed. Both Korean and Malaysian union ideologies, strategies, organizational structures and forms of collective bargaining made sense and changed with the circumstances. The union effectiveness was above average in both countries in comparison to other industries, but the Korean autoworkers rapidly achieved a much higher level of wages and working conditions than their Malaysian counterpart. This cross-country difference is partly explained by the different position held by the Korean and Malaysian auto companies in the global and local auto value chain. The radicalism and effectiveness of Korean autoworker unions sustained the development of dynamic efficiency among Korean auto manufacturing firms, which again sustained and improved export competitiveness and later on outward FDI. In the same way, the intra-industry differences in wages and working conditions among auto manufacturing firms and components supplier firms were also related to the stratification of the domestic auto value chain, and this uneven distribution of benefits created obstacles of centralized unionization and collective bargaining. The centralized IR system in Malaysia evolved in an auto industry composed primarily of firms assembling imported CKD kits of components. The inequality of employment conditions between auto manufacturers and component suppliers was a driver of the strategy to centralized unionism and collective bargaining in Korea, while the inequality was not perceived as that significant by the Malaysian industrial union, probably because it has been dealing with these problems since the early 1990s. Finally, the Korean autoworker unions became part of a new, independent and democratic labor movement in the "Great Labor Struggle" in the late 1980s, and they have stayed with this labor movement, which also spun off a democratic labor party. The Malaysian autoworker unions arose in a labor Asia Research Centre, CBS, Copenhagen Discussion Papers 2005-3. 35 market, which already carried centralized IR institutions, established in late colonialism to counteract the eventual return of a defeated Communist labor movement, and which was transformed in accordance with a new ethno-political policy of indigenization. The radical industrial union tried to create an alternative, radical trade union movement, but failed and became the internal opposition after returning to the labor center (MTUC)9. The Malaysian unions stayed united in a pragmatic-conservative trade union center, while the Korean unions have been divided into a radical labor center (KCTU) and a conservative-turned-pragmatic trade union center (FKTU). But in spite of this difference in trade union unity, the Korean unions held more political leverage due to their militancy and larger political space in comparison with Malaysian unions which risk immediate deregistration if they adopt an illegal, militant strategy or engage in political struggles like the Koreans. Notes: 1 This paper is a product of my collaboration with Jooyeon Jeong, Korea University and enduring interviews and discussions with trade unionists in the Korea and Malaysia. The recent research from 2001 to 2003 on trade unions in Korea and Malaysia was supported financially by the Danish Research Council for Social Sciences (SSF). Moreover, research on automobile global value chains and foreign-local linkages in Malaysia, India and South Africa 2003-2004 has been supported by the Danish Council for Development Research (RUF) in relation to the research project ‘Globalization, Competitiveness and Third World Enterprises’ 2001-2004. 2 Gereffi (1999, p. 38 note 1) uses the term to signify “relational contracting, specification contracting, and full-package supply”, i.e. both end-user commodities and intermediary commodities, as long as they are produced by using brand owner specifications and standards. Within the auto industry ‘community’ the term OEM denotes the assemblers regardless of their ‘brand’ or ‘design’ status, and we will stick to this simple terminology to avoid confusion, except in table 1 in the appendix (see explanatory note). 3 Proton exported 8,648 units in 2002 and 7,929 units in 2003 (Proton Annual Report 2003, p. 34). 4 Koo (2001) uses slightly different English names for these unions. 5 Interview with HMC union officers by Jeong & Wad, June 2001. 6 The industrial union was originally named the Transport Equipment and Allied Industries Employees Union (TEAIEU) and shifted name in early 1990s to differentiate itself from the Transport Workers Union unionizing drivers etc. 7 IMF News 2003, No.3 8 The New York Times 2003-08-19. 9 In the tri-annual MTUC election by the end of 2004, the executive secretary of the NUTEAIW won the presidency of the MTUC due to an election alliance between two pragmatic coalitions of unions against the conservative coalition presided by the former MTUC president. 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