Burning Their Boats: Carmakers: ‘We Will Move Factories Overseas If Kia Loses Ordinary Wage Lawsuit’ | BusinessKorea

Saturday, August 19, 2017

Korean automakers face a critical juncture in relation with the court’s first verdict of an ordinary wage lawsuit against Kia Motors.
Korean automakers face a critical juncture in relation with the court’s first verdict of an ordinary wage lawsuit against Kia Motors.
SEOUL,KOREA
11 August 2017 - 12:00pm
Michael Herh

Before the court’s first verdict of an ordinary wage lawsuit against Kia Motors, Korean automakers said, "If labor cost burden increases due to ordinary wages, we have no choice but to consider moving our production base overseas."

“If the verdict compels Kia Motors to additionally pay about three trillion won (US$2.7 billion) in labor cost, it will deal a big blow to the company’s competitiveness," said the Korea Automobile Manufacturers Association (KAMA) which represents Hyundai, Kia, GM Korea, Renault Samsung and Ssangyong in a statement titled "the KAMA’s position on ordinary wages" on August 10.

This is because the association is concerned that if Kia Motors which accounts for 37% of domestic automobile production faces a crisis in terms of management and competitiveness, it will negatively affect first-, second- and third-tier partners and ultimately impact Hyundai Motor of its parent group. They argued that if the verdict is made in favor of ordinary wages, it will lead to an increase in labor costs of other Korean automakers and legal proceedings, sparking off a crisis in overall ecosystems of the Korean automobile industry and resulting in less investment in technology development and future competitiveness in the automobile industry.

The automakers appealed, saying, "At this level, we are eagerly asking the judiciary to decide on ordinary wages, taking into account the factual truth of ordinary wage matters and a crisis facing the automobile industry and carmakers." "We expect the judiciary to make a wise judgment so that the automobile industry will overcome a crisis and continue to contribute to the preservation and creation of jobs as a key national industry which accounts for 13.6% of Korea's manufacturing production, 11.8% of employment and 13.4% of exports."

In the statement, automobile makers claimed that it was unfair to pay wages retroactively due to change in ordinary wages in accordance with the principle of good faith, emphasizing that bonuses were not included in ordinary wages as a result of government guidelines or labor-management agreements, The Ministry of Labor’s administrative guidelines established in 1988 stipulate that bonuses that are not paid each month are not included in ordinary wages. Employers in the private sector assert that they have regarded the guidelines as a lawful item to abide by and applied them to wage negotiations. “If the court gives disadvantageous burdens to the company with no responsibility for its wage system ad total wages and gives huge windfall income to the labor union while newly defining the concept of an ordinary wage, it will ignite problems in terms of judicial justice and equity,” they argued.

 

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