Hyundai braces for cru­cial rul­ing

Court to rule on Kia Mo­tors or­di­nary wage trial today

The Korea Times - - BUSINESS - By Jhoo Dong-chan jhoo@ktimes.com

Be­lea­guered Hyundai Mo­tor faces an­other in­flec­tion point today. The court is sched­uled to rule on the trial of its sis­ter brand Kia Mo­tors work­ers’ or­di­nary wage, of which the ver­dict is feared to shake all in­dus­tries.

Var­i­ous busi­ness and po­lit­i­cal groups ex­press their con­cerns that Kia Mo­tors may have to pay up to 3 tril­lion won ($2.66 bil­lion) from its re­serve funds if the ver­dict goes against the na­tion’s sec­ond-largest car­maker. It could also in­flu­ence a num­ber of sim­i­lar on­go­ing law­suits with about 200 firms here.

Kia Mo­tors posted an op­er­at­ing profit of 787 bil­lion won in the first half of the year, down 44 per­cent from a year ago. It was the car­maker’s worst per­for­mance since 2010.

If the court sides with the work­ers, the car­maker is likely to post a deficit in the third quar­ter for the first time since 2007.

“The rul­ing may have an un­ex­pected im­pact on other man­u­fac­tur- ers and their com­pet­i­tive­ness,” the Amer­i­can Cham­ber of Com­merce in Korea said in a press re­lease, im­ply­ing the court rul­ing may lead to a re­duc­tion of for­eign in­vest­ments.

“A con­tin­ued rise of la­bor costs will have a neg­a­tive im­pact on for­eign in­vest­ment. Job qual­ity and firms’ sus­tain­able growth should be bal­anced. Gov­ern­ment, com­pa­nies and work­ers should all work to­gether to in­tro­duce a fa­vor­able busi­ness en­vi­ron­ment com­ply­ing with global stan­dards.”

Fears also stir po­lit­i­cal cir­cles.

“If Kia Mo­tors loses the case, its im­pact will in­flu­ence the na­tion’s car in­dus­try as a whole,” mi­nor op­po­si­tion Peo­ple’s Party law­maker Chang By­oung-wan said ear­lier this week.

“Due to pos­si­ble in­creased la­bor costs, about 23,000 job op­por­tu­ni­ties are ex­pected to be off the ta­ble. Busi­ness cir­cles claim so­cial costs may amount to 38 tril­lion won. GM Korea may also face ad­di­tional la­bor costs of 500 bil­lion won for the next three years de­pend­ing on the court rul­ing. Then, GM is likely to with- draw from the Korean mar­ket.”

An­other Peo­ple’s Party law­maker Cho Bae-sook agreed.

“The na­tion’s car­mak­ers have al­ready suf­fered from the Chi­nese gov­ern­ment’s eco­nomic re­tal­i­a­tion over de­ploy­ment of the U.S. mis­sile de­fense sys­tem and low de­mand in overseas mar­kets. If the court rules against Kia Mo­tors, the car­maker group may face an un­prece­dented cri­sis this year,” she said.

Hyundai Mo­tor said Tues­day its four fac­to­ries in China have stopped op­er­a­tions af­ter a local sup­plier re­fused to pro­vide prod­ucts be­cause of de­layed pay­ments.

Beijing Hyundai Mo­tor, the car­maker’s local joint ven­ture there, be­gan to slow down its pro­duc­tion line in its Hangzhou and three other plants in Beijing last week be­cause of a lack of parts.

The four plants then restarted pro­duc­tion op­er­a­tion on Wed­nes­day, but con­cerns are mount­ing as the com­pany’s profit plunge this year is due to the po­lit­i­cal row linked to diplo­matic ten­sions be­tween Seoul and Beijing.

Hyundai Mo­tor Group head of­fice in Seoul

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