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EXCLUSIVE Korean auto giant Hyundai investigating child labor in its US supply chain

DETROIT, Oct 19 (Reuters) – Hyundai Motor Co (005380.KS), Korea’s top automaker, is investigating child labor violations in its US supply chain and plans to “sever ties” with Hyundai suppliers in Alabama found to have relied on underage workers , the company’s global chief operating officer Jose Munoz told Reuters on Wednesday.

A Reuters investigative report in July documented children, including a 12-year-old, working at a Hyundai-controlled metal stamping plant in rural Luverne, Alabama, called SMART Alabama, LLC.

Following the Reuters report, Alabama’s state Department of Labor, in coordination with federal agencies, began investigating SMART Alabama. Authorities subsequently launched a child labor probe at another of Hyundai’s regional supplier plants, Korean-operated SL Alabama, finding children as young as age 13.

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In an interview before a Reuters event in Detroit on Wednesday, Munoz said Hyundai intends to “sever relations” with the two Alabama supplier plants under scrutiny for deploying underage labor “as soon as possible.”

In addition, Munoz told Reuters he had ordered a broader investigation into Hyundai’s entire network of US auto parts suppliers for potential labor law violations and “to ensure compliance.”

Munoz’s comments represent the Korean automotive giant’s most substantive public acknowledgment to date that child labor violations may have occurred in its US supply chain, a network of dozens of mostly Korean-owned auto-parts plants that supply Hyundai’s massive vehicle assembly plant in Montgomery, Alabama .

Hyundai’s $ 1.8 billion flagship US assembly plant in Montgomery produced nearly half of the 738,000 vehicles the automaker sold in the United States last year, according to company figures.

The executive also pledged that Hyundai would push to stop relying on third party labor suppliers at its southern US operations.

As Reuters reported, migrant children from Guatemala found working at SMART Alabama, LLC and SL Alabama had been hired by recruiting or staffing firms in the region. In a statement to Reuters this week, Hyundai said it had already stopped relying on at least one labor recruiting firm that had been hiring for SMART.

Munoz told Reuters: “Hyundai is pushing to stop using third party labor suppliers, and oversee hiring directly.”

Munoz did not offer further detail into how long Hyundai’s probe of its US supply chain would take, when Hyundai or any partner plants could end their dependence on third party staffing firms for labor, or when Hyundai could end commercial relationships with two existing Alabama suppliers investigated for child labor violations by US authorities.

In a statement on Wednesday, SL Alabama said it had taken “aggressive steps to remedy the situation” as soon it learned a subcontractor had provided underage workers. It terminated its relationship with the staffing firm, took more direct control of the hiring process and hired a law firm to conduct an audit of its employment practices, it said.

SMART Alabama did not immediately respond to a request for comment.

Munoz’s comments come on the same day that an investor group working with union pension funds sent a letter to Hyundai, pushing it to respond to reports of child labor at US parts suppliers, and warning of potential reputational damage to the Korean automaker.

The letter said that the use of child labor violated international standards Hyundai committed to in its Human Rights Charter and its own code of conduct for suppliers.

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Reporting by Joseph White in Detroit and Joshua Schneyer in New York; Additional reporting by Mica Rosenberg in New York and Kristina Cooke in San Francisco; Editing by David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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