A new type of culture clash: American workers vs. foreign managers

While Republican lawmakers in Wisconsin and certain other states are seeking to curtail the power and influence of public sector unions, a different kind of labor dispute is taking place in Philadelphia which may be an augur for U.S. employee-management relations in the future.

It is about the conflict between American workers and their foreign management.

The Philadelphia Inquirer reported that workers at a factory that manufactures railcars for the Southeastern Pennsylvania Transportation Authority (SEPTA) have filed complaints with the National Labor Relations Board (NLRB) related to the treatment they face from their managers – who are South Korean.

The manufacturer is Hyundai-Rotem USA Corp., a subsidiary of the Hyundai-Kia Automotive Group, which received a contract to build the railcars in South Philadelphia.

Hyundai-Rotem also has deals to build railcars for the Boston and Los Angeles transit systems.

About 185 people work at the Philadelphia factory assembling railcars made in South Korea. After the hiring of an additional 27 technicians from Korea and 90 workers from the region, the plant will have about 300 employees.

The facility is scheduled to manufacture 117 railcars, but it has fallen far behind, allegedly due to shortages of materials, design flaws and inadequate equipment. However, a unique feature of this labor dispute has to do with what is being perceived as a “culture clash” between the Korean bosses and their American labor force.

Black, Hispanic and female members of the factory were particularly aggrieved by the disparaging treatment they received, including alleged acts of physical abuse.

A lack of communication between the Koreans and Americans, as well as a lack of respect for Americans, are also huge problems, the complaint alleges.

The workforce, which voted to join the Transport Workers Union last summer, also claim that Hyundai-Rotem pays such low wages and benefits that many of them have to use food stamps to survive.

The Inquirer quoted Jun-Yeon Jeong, manager of the SEPTA project for Hyundai-Rotem, who seemed to minimize the existence of the ongoing dispute.

Everybody is doing well, regardless of race or gender, he said. From my observations, that is not a problem.

A spokesman for SEPTA also seemed to wash its hands of the affair.

We expect Rotem, and all of our vendors, to comply with legal and social norms,” the spokesman told the Inquirer.

“But this is not our issue - it's between them and their workforce down there.

According to the Inquirer, SEPTA ordered 120 cars from Hyundai-Rotem in 2006 for $274 million (the total cost, including spare parts and training and management, would be about $330 million). So far, SEPTA has paid $71.5 million to Hyundai-Rotem, but only five of the new cars are in service.

Five other cars have been delivered from the Philadelphia plant, but SEPTA is still testing three of them.

Reportedly, these cars have many problems, including “faulty communications systems, inadequate heating and cooling systems, balky doors, and computer software glitches.”

Hyundai-Rotem is incurred penalties of $200 for each day a railcar is late -- the overall project is now already more than a year behind schedule.

According to the article, Jeong attributed a large part of the production problems at the plant to the lack of skilled workers.

It is not so easy to find them around here, Jeong said. We hired unskilled laborers and trained them. It was not so quick. We are bringing in more workers from Korea to work on bottlenecks, where we need higher skills, so we can have a smoother process,

Critics also point out that the Korean managers are simply not prepared for American labor practices nor American regulations in the workplace.

Stephen Bronars, a labor economist at Welch Consulting, explains that foreign-owned companies employ a small (currently less than 5 percent) but growing fraction of the U.S. workforce.

“This is a growing segment of our economy for a number of reasons,” he said.

“Foreign investors are buying shares of U.S. owned companies and acquiring U.S. companies (even the NYSE was acquired by the German stock market). This capital inflow occurs because of our balance of trade deficit (we are a net exporter of dollars and a net importer of goods and services) and the fact that we borrow more than we save in both the public and private sectors . So we ask foreigners to do the saving for us - which they do buy buying U.S. Treasury bonds, corporate bonds, and stock in US companies.”

In addition, some foreign companies – including BMW, Mercedes, Toyota, Nissan, EADS -- have recently put production facilities in the U.S.

“They typically locate in right-to-work states and are less likely to have unionized workforces,” Bronars indicated.

“So, for all the aforementioned reasons, I expect more culture clashes between management in foreign-owned companies and workers in the U.S. On the other hand, a number of academic studies show that these enterprises are more profitable, have more secure employment, and benefit from the technological advantages conferred from their foreign ownership.”