Hyundai needs to take a long, hard look at its supply chain.
The SOC Investment Group is pressing the Hyundai Motor Company to respond to reports of child labor at its American parts suppliers.
While the abuse was not found within Hyundai but rather at a supplier, the South Korean manufacturer has been looking to push production into America. The brand is preparing to break ground on an electric vehicle plant in Georgia, which will likely produce models like the Ioniq 5.
In July, Reuters found child labor at a metal stamping plant operated by SMART Alabama LLC. The publication discovered workers as young as 12 worked in the facility. Hyundai lists SMART as a majority-owned unit. It also supplies parts to Hyundai's Alabama plant.
"Child labor and poor workplace health and safety have regulatory and legal repercussions for Hyundai in the US and can cause reputational damage across the globe," said the letter from SOC. It urged Hyundai's board of directors to oversee the company's response.
It also called for several actions, including an independent assessment of human and labor rights risks in the brand's supply chain. The results of this report would be publicly released and would include continuous monitoring to ensure this never happens again.
In August, authorities found children as young as 13 working at LS Alabama, a parts supplier owned by Korea's SL Corp. Per Reuters, that company has entered into a settlement with the Department of Labor. Hyundai commented on this specific matter, saying it appreciated the federal settlement between the two entities.
Additionally, SMART Alabama has severed all ties with a staffing company it used. To our knowledge, SMART still supplies parts for the Hyundai Motor Company.
"Hyundai will continue to closely review the labor operations of its suppliers to ensure full compliance with all local, state, and federal laws," said Hyundai.
Last week, the United Autoworkers union and more than 24 advocacy groups called for an end to child labor practices. We should point out that the SOC Investment Group says the companies it works with hold roughly 27,000 shares in Hyundai. The group's executive director, Dieter Waizenegger, said that the SOC would continue to call out mistreatment and bring attention to other social issues.
"In the US 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.'"