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Korean automakers bemoan rising domestic labor costs

Aug 23,2017
Korean carmakers on Tuesday cited high costs and low productivity as major sources of concern as they compete in an ever-competitive market.

In a seminar held in Seoul to discuss outstanding issues facing local automakers, executives from Hyundai Motor and Kia Motors expressed worries about an unfriendly business environment in the auto market.

Hyundai and Kia, which together form the world’s fifth-largest automaker by sales, have gradually increased their overseas production volumes in the past decade due to rising labor costs and relatively low productivity at local plants.

In particular, Kia Motors voiced serious reservations about a court ruling on wages due out later this month or early next month in which the court is expected to rule on whether bonuses ought to be considered part of a worker’s salary. The lawsuit was filed by Kia employees in late 2011.

“We may have to retroactively make additional payments to union workers as we respect a court’s ruling,” Kia CEO Park Han-woo said at the seminar. “But it will deal a heavy blow to the company’s bottom line at a time when it is suffering from declining sales in China and the U.S., and low operating profit margins.”

Seminar participants also pointed to union-friendly labor laws and frequent strikes as major factors that are hurting competitiveness at the five automakers operating in Korea.

Unions at Hyundai, Kia and GM Korea have staged strikes this year over failed wage negotiations. Renault Samsung is in talks with its union, and SsangYong Motor signed a wage deal with its union in July. YONHAP