Hyundai Motor Group freezes its supervisory employees’ wages in an effort to restrain costs and improve its constituent companies’ ability to cope with difficult business conditions expected throughout 2017.
Aimed primarily at automakers Hyundai and Kia, the freeze affects some 35,000 supervisors and managers in more than 50 affiliated companies.
A Hyundai Motor spokesman tells WardsAuto the freeze applies to the salaries of managers, deputy general managers and general managers.
The unnamed spokesman notes that as a manager his own salary has been frozen, but adds: “I don’t mind at all. My company being stable is a lot more important than getting a little more money.”
In a letter to affected employees, Hyundai Motor Group says, “The company is already taking emergency measures to overcome many difficulties, such as an economic downturn, slowing sales and a drop in operating profit, while company executives have voluntarily cut their own wages by 10%.”
Supervisory staff at Hyundai and Kia receive one raise annually, after unionized workers and management sign a new wage agreement.
The wage freeze generates no immediate financial benefits for the companies. However, it will block management salaries from rising after the next wage agreement is reached, which could be as early as midyear or as late as early 2018.
Analysts believe the wage freeze, combined with senior managers’ voluntary wage cut, will play to the patriotism and pride of all workers and staff members and put their companies’ interests ahead of their own and the demands of their labor union.
The wage freeze comes just three months after senior executives above the rank of general manager took 10% pay cuts to help both their companies and the limping Korean economy. The voluntary cuts began in October for all vice presidents, senior vice presidents, executive vice presidents, presidents, vice chairman and chairmen. The management systems of both Hyundai and Kia include several presidents and vice chairmen.
It is the first time Hyundai and Kia have frozen wages since 1998, the year following the Asian financial crisis that was devastating to Korea’s auto industry and caused the bankruptcy of rival automaker Daewoo, which was acquired by General Motors and now operates as GM Korea.
Both Hyundai and Kia struggled in 2016, with both companies’ sales and earnings hurt by protracted wage negotiations punctuated by frequent partial strikes called by workers’ labor unions.
Hyunda sold 4.86 million vehicles globally, short of its 2016 sales goal of 5.01 million vehicles. Kia sold 3.02 million vehicles, 100,000 units short of its 2016 target.
For 2017 Hyundai and Kia are targeting sales of 5.08 million and 3.17 million units, respectively. Their combined target of 8.25 million units represents a 4.7% increase over their combined 2016 sales of 7.88 million.
For a second consecutive year Hyundai Motor Group Chairman Chung Mong Koo has told middle managers and senior executives that Hyundai and Kia are facing a tough year.
In his New Year’s message Chung told them the slowing global economy, the spread of trade protectionism and intensifying competition are causing increased uncertainty in the industry.