South Korean Carmakers Suffer Big Blow As Kia Loses Landmark Wage Dispute
South Korea’s Kia Motors (000270.KS) said it expects to pay about 1 trillion won (686.67 million pounds) in additional wages and would post a third-quarter operating loss after a court ruled in favour of workers in a landmark labour dispute on Thursday.
Seoul Central District Court gave workers a major, if only partial, victory in their closely watched dispute with Kia, ordering the Hyundai Motor (005380.KS) affiliate to pay about 420 billion won in unpaid wages.
But Kia said the additional labour costs arising from the ruling would be more than double that amount, once all its workers’ wages were adjusted.
The payout, though significantly less than the roughly 1 trillion won demanded by workers in the six-year legal battle, is a blow to South Korean automakers just as they are battling a sales slump in China amid regional strategic tensions.
“The current operational situation is such that the ruling amount is hard to bear,” Kia said in a statement, adding it would appeal immediately
Kia Motors shares fell 3.5 percent and Hyundai Motor was 1.8 percent lower after the ruling, while the wider market .KS11 fell 0.4 percent.
A labour representative told reporters the court had vindicated workers in the face of Kia’s argument that their demands amounted to an attack on Asia’s fourth-biggest economy.
“The ruling today confirmed that … the union can aid the company’s development,” he said.
The workers in their claim said 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.
The case goes back to an original claim in 2011 of 659 billion won in unpaid wages. With interest it came to more than 1 trillion won.