Kia Motors loses landmark wage dispute

SEOUL: Kia Motors said that it expected to pay about one trillion won ($887.11 million) in additional wages and would post a thirdquarter operating loss after a court ruled in favour of workers in a landmark labour dispute yesterday.

Seoul Central District Court gave workers a major, if only partial, victory in their closelywatched dispute with Kia, ordering the Hyundai Motor Co affiliate to pay about 420 billion won in unpaid wages.

But Kia said the additional labour costs arising from the ruling would be more than double that amount, once all its workers’ wages were adjusted.

The payout, though significantly less than the roughly one trillion won demanded by workers in the six-year legal battle, is a blow to South Korean automakers just as they are battling a sales slump in China amid regional strategic tensions.

“The current operational situation is such that the ruling amount is hard to bear,” Kia said in a statement, adding it would appeal immediately

A labour representative told reporters the court had vindicated workers in the face of Kia’s argument that their demands amounted to an attack on Asia’s fourth-biggest economy.

“The ruling today confirmed that ... the union can aid the company’s development,” he said.

The workers in their claim said regular bonuses should be included as part of a base pay used to calculate overtime, compensation for unused annual leave, severance pay and other payments.

The case goes back to an original claim in 2011 of 659 billion won in unpaid wages. With interest it came to more than one trillion won.

South Korea’s car industry association warned the ruling could have far-reaching negative consequences for the sector if it sparked other wage claims.

“As a company which outputs more than one-third of local producton, Kia Motors’ wage conditions and operational crisis will spread to other automakers and suppliers, adding more pressure to the crisis in South Korea’s auto industry,” it said in a statement.

Kia’s second-quarter operating profit of 404 billion won was 48% down from last year and analysts were expecting the firm to beat that in the third quarter, according to forecasts made before the court ruling.

South Korean firms like Kia, Hyundai and Lotte have been battered by Chinese boycotts and regulatory pressure over Seoul’s decision to deploy a US missile defence system to counter threats from nuclear-armed North Korea.

China says the system poses a threat to its national security.

Hyundai Motor — which together with Kia is the world’s No. 5 automaker — in July posted its smallest quarterly net profit in five years.

The company said its second-quarter net profit halved from a year ago to 817 billion won ($729.14 million) — its 14th straight year-on-year fall and the smallest since the first quarter of 2012. Analysts on average had expected 1.35 trillion won.

Its operating profit came in at 1.34 trillion won and sales at 24.31 trillion won for the period.

Hyundai Motor’s retail sales in China, the world’s biggest auto market, slumped 29% in the first half of 2017.