The South Korean Curse: Kia Loses Landmark Wage Dispute With Employees

by Matt Posky

Published: August 31st, 2017

the south korean curse kia loses landmark wage dispute with employees

Seoul Central District Court ruled against Kia Motors on Thursday, ordering the automaker to pay around 420 billion won, or $374 million, in unpaid wages. Kia employees first filed an initial lawsuit in 2011, claiming a 659 billion won wage disparity, following it up with an additional suit in 2014.

However, the automaker claims the final cost will be closer to 1 trillion won, or about $890 million, and could result in a third-quarter operating loss. Interestingly, this is roughly the same amount workers demanded over their six-year legal dispute (after interest).

“The current operational situation is such that the ruling amount is [difficult] to bear,” Kia said in a statement.

Kia will appeal the court decision at the earliest possible date.

According to Reuters, labor representatives claim the court vindicated the protesting workforce after Kia attempted to frame them as greedy troublemakers attempting to cripple Korea’s automotive industry.

“The ruling today confirmed that … the union can aid the company’s development,” a spokesperson for the workers’ union told reporters.

The workers say 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.

Executives at Kia — and by extension, Hyundai Motor Group — are concerned that the court’s ruling could result in negative implications if it sparks other wage claims within the industry. “As a company which outputs more than one-third of [its] local production, 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,” the automaker said in a statement.

Second-quarter operating profits dipped 48 percent from last year, but analysts were expecting Kia Motors to bounce back somewhat in the third quarter — despite a fairly grim financial outlook at the start of the year. The automaker is less convinced this will be the case after the court ruling. Company shares fell 3.5 percent after news broke, while Hyundai’s share price fell by 1.8 percent.

Recent political tensions between South Korea and China have also hurt the Pacific automotive industry. China has enacted numerous boycotts on goods coming from the country after South Korea’s decision to deploy a U.S. missile defense system to protect itself from a potential nuclear strike from North Korea.

Hyundai Motor Group, which includes Kia, saw Chinese sales fall by 64 percent between April and July.

#AutomotiveIndustry #China #Finances #HyundaiMotorGroup #KiaMotors #Korea #LaborIssues #LawAndOrder #LegalDisputes #SouthKorea #UnionNews

Matt Posky

Consumer advocate tracking industry trends and regulations. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied, he pivoted to writing about cars. Since then, he has become an ardent supporter of the right-to-repair movement, been interviewed about the automotive sector by national broadcasts, participated in a few amateur rallying events, and driven more rental cars than anyone ever should. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and learned to drive by twelve. A contrarian, Matt claims to prefer understeer and motorcycles.

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10 of 14 comments

Slavuta on Aug 31, 2017

"The workers say regular bonuses should be included as part of a base pay " dictatorship of proletariat - where did I hear that before?

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- Psarhjinian on Aug 31, 2017
  
  I know! Don't they realize that only rich people should be able to dictate terms? What kind of gall do these paeons have, trying to get a fair share.
  
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- Cactuar on Aug 31, 2017
  
  @psarhjinian Isn't the fair share their regular salary?
  
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- Bikegoesbaa on Aug 31, 2017
  
  @Cactuar Apparently not.
  
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- Slavuta on Aug 31, 2017
  
  @psarhjinian comrade, get elected and dictate all you want
  
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- Null Set on Aug 31, 2017
  
  @Cactuar Ha ha. Tell that to any executive. Watch them head for the door.
  
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- Lou_BC on Aug 31, 2017
  
  @Cactuar "Isn’t the fair share their regular salary?" This is 6 years worth of back wages with interest. The courts obviously agreed that the workers were in the right on this one.
  
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Maclifer on Aug 31, 2017

Hoping Kia will pull through in the near future. They are making really good products the last 5 years it so. Absolutely enjoying my 2014 Forte EX. Very good quality and performance to match and super spacious for us taller folk in front and rear seats.

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- Brn on Aug 31, 2017
  
  Korean business quite a bit more corrupt than people claim US businesses to be. Why would you want companies like that to succeed?
  
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- Raph on Sep 02, 2017
  
  They will, what's a billion dollars in retro pay when you divide the cost over say 10 model years (about 34 bucks if they can keep production over 3 million vehicles a year). Like Sergio said awhile back, they just pass this stuff on to the end purchaser. Nobody would even notice if Kia added 100 dollars to the price of a vehicle to cover this or even if they wanted to pay it up in a year at over 300 bucks a vehicle.
  
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