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Kaica calls for base salary decision

Local auto parts manufacturers are urging the government to give them a clear decision on base salary calculation after a meeting between labor, management and government officials at the National Assembly’s Environment and Labor Committee failed to come to an agreement ahead of its deadline yesterday.

The Korea Auto Industries Cooperative Association (Kaica), the nonprofit organization that represents the country’s auto parts manufacturers, and CEOs of auto parts companies held a press briefing yesterday at Kaica’s building in southern Seoul to express their concerns over a move by lawmakers to revise the law on base salary calculation following recent court rulings.

“The government is talking about removing the ‘thorn under the nail’ that makes it difficult for local companies [to pay workers], but for us, this is issue is about the ‘thorn in the neck’ that is threatening the survival of the industry,” said Kaica Chairman Shin Dal-suk.

The Supreme Court ruled in various cases that regularly paid bonuses should be regarded as part of base salary. The decisions were considered a huge setback for employers because base wages are used to calculate other payments such as overtime and retirement allowances.

The government’s Environment and Labor Committee has been holding meetings between worker and company representatives to try to resolve differences that have arisen from the issue, including labor-hour reductions, before proposing a law. It failed to reach an agreement before its deadline yesterday, but the committee will have an unofficial meeting tomorrow to continue discussions.

Kaica said that if regularly paid bonuses are included in base wages, the industry expects to see labor costs rise 591.4 billion won ($499 million) every year, citing a report from the Korea Industrial Relations Association.

It also expects the value of exports to drop 1.73 percent and for 7,516 jobs to be eliminated. Kaica’s 2012 data shows that there are 887 first-tier auto parts suppliers for the nation’s seven automakers (including bus and truck manufacturers).

“The burden of labor costs will push local companies to move their production base to countries with cheap labor costs and will cause us to increase portions of ‘buy-back’ products,” Kaica said in a release.

In addition, Kaica said that the base salary problem will weaken business for Korean auto parts manufacturers because they would not be able to maintain price competitiveness in the global market.

“Hyundai and Kia these days ask us to also supply in major automakers like Mercedes-Benz or BMW, which proves the quality of our products, but if the situation changes, we can’t do it,” said Park In-chul, chairman of local auto parts maker Leehan. “We are currently in the middle of a situation that will determine our fate.”

BY JOO KYUNG-DON [kjoo@joongang.co.kr]