SEOUL, Aug. 8 (Korea Bizwire) — GM Korea is reportedly in dire straits. The company already saw a partial work stoppage on July 17. Circumstances have become so serious that the Korea Development Bank (KDB Bank), the second largest shareholder in the company, questioned the automaker’s ability to stay in business.
GM Korea is reportedly in dire straits. The company already saw a partial work stoppage on July 17. (Image: Yonhap)
In 2002, Daewoo Motors was purchased by GM with the guarantee of “15 years of sustained ownership”. The worry bandied about is that GM may choose this moment to pull out of Korea altogether.
If such a thing were to happen, the impact on Korean society would be catastrophic. GM Korea employs 16,000 workers, and taking into account the various affiliated companies that depend on GM Korea for their survival, over 300,000 could be out of work.
For Kia, which is already struggling (operating profits are at the lowest level since 2010), the company’s future may be guaranteed or devastated depending on the decision handed down by the legal system over a dispute on employee bonuses.
Kia Motors pays out bonuses on a yearly basis that is both consistent and “regular”, so much that employees readily expect these bonuses as a part of their salary, which is the crux of the problem: labor and (most likely) the courts also believe that these bonuses should be incorporated into standard wages rather than continuing to be classified as “bonuses”.
According to Kia, if such a ruling were to be handed down, it will be on the hook for 3 trillion won to be paid out to employees, which would leave the company in an unenviable financial position. (Image: Court of Korea)
Reportedly, Kia is not opposed in principle to such reclassification measures – what it is wary of is what may come next. If the court rules (the ruling is expected to be made on August 17) that Kia must not only use the combined amount of standard wages and regular bonuses as a baseline for salary going forward, but also rules that Kia must reimburse its employees for past wages with the newly formulated amount as a baseline, Kia will be in deep trouble.
According to Kia, if such a ruling were to be handed down, it will be on the hook for 3 trillion won to be paid out to employees, which would leave the company in an unenviable financial position. Taking into consideration its decline in profits, the automaker would most likely be knee deep in the red.
Some worry that the ruling won’t stop at Kia, but will have a destabilizing effect on the entire industry. Commenting on the situation, an insider said that “if Kia loses the case in court, work stoppages and the possibility of GM Korea shutting down become very real”.
S.B. Woo (sbw266@koreabizwire.com)
