Kia suspends scheduled daily overtime work at all of its Korean plants in response to a court ruling it must include bonuses and lunch allowances in calculating regular wages.
GM Korea meanwhile is hit by partial strikes that are playing havoc with the automaker’s production schedules.
Sources at the Kia Branch of the Korean Metal Workers Union say leadership is furious with Kia’s move, which it calls an irrational reaction.
Union spokesmen say they cannot permit the automaker to unilaterally eliminate overtime from plant production schedules without negotiating the matter. But what action the union may take is undecided.
The company notified the KMWU Thursday it is eliminating overtime from the daily work schedules at its plants in Gwangju, Sohari and Hwaseong beginning Monday.
This will reduce scheduled working hours 30 minutes each day (10 minutes of overtime built into day shifts and 20 minutes built into afternoon shifts).
Analyst calculations show the seemingly small overtime payment is roughly 1 million won ($883) per worker annually, so workers stand to lose that amount in their take-home pay.
Additionally, the KMWU has declined weekend overtime work since it began a series of partial strikes last month. Management now will continue to eliminate weekend overtime as a matter of policy, which will cut even further into workers’ take-home pay.
The two sides still are at loggerheads over union demands for a monthly wage increase of 154,883 won ($136) and bonuses that in aggregate would equal 30% of Kia’s 2016 net income.
The automaker is projecting a loss for the third quarter and analysts suspect it may report a loss for the last half of 2017 because of the court ruling on overtime.
The Seoul Central District Court ruled Aug. 31 in favor of the KMWU and ordered Kia to restate overtime and severance payments made in the 2008-2011 period to include bonuses, lunch allowances and some other items when determining overtime and severance payments.
The amount due retroactively for that 3-year period was 422.3 billion won ($375 million).
However, Kia must take a one-time hit of 1 trillion won ($877 million) by setting up a special contingency fund in the current third quarter. This is to meet the new liability for the 2008-2011 period and additional liability for 2012-2017.
The union is filing additional lawsuits to demand overtime and severance-pay adjustments for all overtime payments made since the beginning of 2012.
Setting aside 1 trillion won in the current quarter will erase any operating or net income for the period. The loss may be large enough to wipe out fourth-quarter profits as well if Kia’s current sales slump in major markets, mainly China, continues.
For the January-August period, Kia’s sales were 1.76 million units, down 7.8% with from 1.91 million sold in like-2016.
Kia’s sales in China for the same 8-month period totaled 172,674 units, down 53% from 368,686 year-ago.
Wage negotiations at Kia’s Hyundai affiliate are on hiatus while the Hyundai Branch of the KMWU holds campaigns to elect a new president and slate of officers. The union anticipates it will not return to the bargaining table until as late as early November.
The Hyundai union has made the same wage and bonus demands as those sought by its Kia counterpart.
GM Korea Hit By Partial Strikes
The GM Korea Branch of the KMWU also seeks the same monthly pay raise of 154,883 won that sister KMWU unions at Kia and Hyundai are demanding.
As soon as Kaher Kazem took over Sept. 1 as CEO of GM Korea he met with union officials to discuss the company’s dire financial condition. He asked KMWU officials and workers to cooperate with him to help find ways to reduce costs, increase productivity and work in harmony.
Until then union and management teams had held 18 rounds of wage negotiations but were at an impasse.
The union participated Sept. 5 in a general protest strike called by the KMWU that was not directly tied to wage negotiations.
However, on Sept. 13, when Kazem and his bargainers attempted to hold a 19th round of wage negotiations, the session was abruptly canceled.
“The company tried to resume the 19th round of negotiations. It is regrettable that we were not able to achieve practical negotiations due to issues in the preparation process,” a spokesman tells WardsAuto. “No meetings have been held since then.”
The union launched partial strikes Sept. 14, costing GM Korea a full 48 hours of lost production in little more than one week.
In addition to the Sept. 5 partial strike that caused the company eight hours of lost production, the union stopped work Sept. 14 (8 hours), Sept. 15 (8 hours), Sept. 18 (12 hours), Sept. 20 (8 hours) and Sept. 22 (12 hours).
The union has not given advance notice of its partial strikes.
Union negotiators are outraged GM Korea has not indicated it would increase the pay offer that was made in the 18th round of negotiations before Kazem took over as CEO.
A company spokesman confirms management is offering a 50,000 won ($44) monthly wage increase, an immediate one-time bonus of 6 million won ($5,300) for signing a new contract and a 4.5 million won ($4,000) performance bonus to be paid at the end of the year.
The company has not divulged the impact of the strikes on either production or sales.
In the first eight months of 2017, GM Korea’s global sales dropped 7.1% to 361,716, compared with 389,460 sold in like-2016.