Hyundai set to divest Alabama subsidiary over child labour revelations

South Korean automaker Hyundai Motor Co on Friday told shareholders that it would divest its controlling stake in a major Alabama auto parts plant where Reuters last year documented children as young as 12 were working. In a February24 letter to shareholders from Hyundai Chief Executive Jaehoon Chang, the company said recent audits at 29 of its direct suppliers across Alabama made it confident they are “now in full compliance with underage labour laws.”

The audits began last Augustafter Reuters first reported on the issue, and were conducted by an outside law firm that reviewed documents and did on-site inspections. Hyundai provided a copy of the letter to Reuters.

Hyundai also told investors that it was implementing extensive new corporate measures, including a training programme for its parts suppliers to begin next month in collaboration with the U.S. Department of Labour (DOL), to prevent future child labour violations. DOL did not immediately respond to a request for comment.

Hyundai’s pledge to its shareholders comes after a 2022 Reuters investigation showed several suppliers to the automaker’s massive Montgomery, Alabama vehicle plant used underage migrant workers to make parts for its popular U.S.-made cars and SUVs.

One of the plants where children worked, SMART Alabama LLC in rural Luverne, Alabama, is a direct Hyundai subsidiary. According to Hyundai’s financial statements from last year, the automaker controls a 72 per cent stake in SMART.

Also watch: Hyundai admits to hiring under-aged children

Chang wrote that Hyundai was “in the process of divesting its ownership interest in SMART” but it would ensure “that the economically important jobs in the Luverne, Alabama community are preserved.”

Hyundai’s letter did not say when the transaction would be completed or identify a buyer or the form a divestiture would take. Since the early 2000s, the metal stamping plant has made chassis parts for hundreds of thousands of Hyundai vehicles per year.

State and federal investigations

Following Reuters’ first story on child labour at SMART last July, as many as 10 Hyundai suppliers in Alabama have been under investigation by state or federal authorities for child labour violations, Reuters reported in December.

One of the plants was inspected last August and authorities found and removed several children from the factory floor, later issuing penalties to the plant operator and a third-party staffing firm who recruited them. “The use of underage labour at a supplier or any operation is unacceptable, and we are committed to making sure non-compliance never happens again,” Chang wrote in the letter. “This is a zero tolerance issue.”

As Reuters reported earlier, many of the underage workers who found their way into the Alabama auto parts plants were recruited by third-party staffing agencies, a process that can allow big corporations to turn a blind eye to the illegal employment of minors.

In the shareholder letter, Chang reiterated that Hyundai was “discouraging” suppliers from relying on such staffing agencies in the future. He wrote that staffing firms who hired children to work at Hyundai supplier plants had provided false employee documentation. In the future, however, Hyundai and its supply chain partners must do more to ensure children are never put to work in their factories, the letter said.

“Ultimately, the responsibility is with Hyundai to make sure all our suppliers understand and meet our high global workforce standards,” Chang wrote.

U.S. and Alabama law prohibit people under age 16 from working in industrial factory settings, and anyone under 18 is prohibited from working in particularly dangerous roles in automotive plants, such as driving forklifts or operating metal-cutting and stamping machines.

Earlier this month, 33 members of Congress urged DOL to seek strong and swift penalties against those responsible for child labour in the Hyundai supply chain.

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