Investor Group, Unions Push Hyundai to Address Child Labor at U.S. Suppliers

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A group that works with union pension funds is pressing Hyundai Motor Co to respond to reports of child labor at U.S. parts suppliers, warning of potential reputational damage to the Korean automaker.

SOC Investment Group, which works with union pension funds that have more than $250 billion in assets, sent a sharply worded letter on Wednesday to company chairman Euisun Chung, saying investors were concerned in the wake of a July investigation by Reuters that found child labor at a Hyundai subsidiary in Alabama. In addition, the letter cited a recent federal and state investigation into children working at another Hyundai supplier in the state.

“Child labor and poor workplace health and safety have regulatory and legal repercussions for Hyundai in the U.S. and can cause reputational damage across the globe,” said the letter from the group, which advises on corporate accountability issues.

The letter urged Hyundai’s board of directors to oversee the company’s response and called for several actions including an independent assessment of human and labor rights risks in the supply chain with publicly released results and ongoing monitoring.

Reuters first documented child labor practices at Hyundai-owned SMART Alabama LLC earlier this year. Then in August, authorities found children as young as 13 working at Alexander City, Alabama-based SL Alabama, a Korean-operated parts supplier and unit of Korea’s SL Corp, and the company entered in to a settlement with the U.S. Department of Labor.

Hyundai spokesperson Ira Gabriel said the company appreciated the federal settlement reached between the U.S. Department of Labor and SL Alabama, and noted that the supplier changed its leadership and introduced additional screening of its labor practices. Gabriel also said SMART Alabama severed all ties with a third-party staffing company.

“Hyundai will continue to closely review the labor operations of its suppliers to ensure full compliance with all local, state and federal laws,” Gabriel said in an email.

SOC’s letter to the company comes after a public rebuke last week from leaders of the United Autoworkers union (UAW) and a September letter to the company from more than two dozen local and national advocacy groups and unions calling for an end to child labor practices.

The Washington, D.C.-based SOC, which said the funds it works with hold an estimated 27,000 shares in Hyundai, has taken a more activist approach to call out worker mistreatment and other social issues, including pressing major companies like Apple Inc and Tesla Inc to make corporate changes, said Dieter Waizenegger, the group’s executive director.

“In the U.S. system, oftentimes the monetary risk for labor rights violations is relatively small so it might be seen as a cost of doing business,” Waizenegger said. “I think investors like us need to step out and say, ‘the value of the fines is not capturing your risk even remotely. Your product might be tinged for a long time.