S.Korean carmakers receive a big blow
seoul — South Korea’s Kia Motors said it expects 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 on Thursday.
Seoul Central District Court gave workers a major, if only partial, victory in their closely watched dispute with Kia, ordering the Hyundai Motor 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. Kia Motors shares fell 3.5 per cent and Hyundai Motor was 1.8 per cent lower after the ruling, while the wider market fell 0.4 per cent.
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 fourthbiggest economy.
“The ruling 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 per cent down from last year and analysts were expecting the firm to beat that in the third quarter, according to forecasts made before the 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 North Korea. China says the system poses a threat to its national security. —