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

Matt Posky
by Matt Posky
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.

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  • Slavuta 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?

    • See 5 previous
    • Lou_BC 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.

  • Maclifer 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.

    • See 1 previous
    • Raph 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.

  • Max So GM will be making TESLAS in the future. YEA They really shouldn’t be taking cues from Elon musk. Tesla is just about to be over.
  • Malcolm It's not that commenters attack Tesla, musk has brought it on the company. The delivery of the first semi was half loaded in 70 degree weather hauling potato chips for frito lay. No company underutilizes their loads like this. Musk shouted at the world "look at us". Freightliners e-cascads has been delivering loads for 6-8 months before Tesla delivered one semi. What commenters are asking "What's the actual usable range when in say Leadville when its blowing snow and -20F outside with a full trailer?
  • Funky D I despise Google for a whole host of reasons. So why on earth would I willing spend a large amount of $ on a car that will force Google spyware on me.The only connectivity to the world I will put up with is through my phone, which at least gives me the option of turning it off or disconnecting it from the car should I choose to.No CarPlay, no sale.
  • William I think it's important to understand the factors that made GM as big as it once was and would like to be today. Let's roll back to 1965, or even before that. GM was the biggest of the Big Three. It's main competition was Ford and Chrysler, as well as it's own 5 brands competing with themselves. The import competition was all but non existent. Volkswagen was the most popular imported cars at the time. So GM had its successful 5 brands, and very little competition compared to today's market. GM was big, huge in fact. It was diversified into many other lines of business, from trains to information data processing (EDS). Again GM was huge. But being huge didn't make it better. There are many examples of GM not building the best cars they could, it's no surprise that they were building cars to maximize their profits, not to be the best built cars on the road, the closest brand to achieve that status was Cadillac. Anyone who owned a Cadillac knew it could have been a much higher level of quality than it was. It had a higher level of engineering and design features compared to it's competition. But as my Godfather used to say "how good is good?" Being as good as your competitors, isn't being as good as you could be. So, today GM does not hold 50% of the automotive market as it once did, and because of a multitude of reasons it never will again. No matter how much it improves it's quality, market value and dealer network, based on competition alone it can't have a 50% market share again. It has only 3 of its original 5 brands, and there are too many strong competitors taking pieces of the market share. So that says it's playing in a different game, therfore there's a whole new normal to use as a baseline than before. GM has to continue downsizing to fit into today's market. It can still be big, but in a different game and scale. The new normal will never be the same scale it once was as compared to the now "worlds" automotive industry. Just like how the US railroad industry had to reinvent its self to meet the changing transportation industry, and IBM has had to reinvent its self to play in the ever changing Information Technology industry it finds it's self in. IBM was once the industry leader, now it has to scale it's self down to remain in the industry it created. GM is in the same place that the railroads, IBM and other big companies like AT&T and Standard Oil have found themselves in. It seems like being the industry leader is always followed by having to reinvent it's self to just remain viable. It's part of the business cycle. GM, it's time you accept your fate, not dead, but not huge either.
  • Tassos The Euro spec Taurus is the US spec Ford FUSION.Very few buyers care to see it here. FOrd has stopped making the Fusion long agoWake us when you have some interesting news to report.