Hyundai braces for crucial ruling
Court to rule on Kia Motors ordinary wage trial today
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