Onward and upwardKia Motors, South Korea’s second largest automaker, has decided to stop working beyond the daily work hours during weekdays and cut extra work hours on weekends. It said that the move was aimed at promoting workers’ welfare, but actually is aimed to reduce labor costs amid sluggish sales in China and other cost burdens from the company’s defeat in a court battle with the union over the application of broader base wage terms, which will force the company to pay back 400 billion won ($353 million).
Despite the union’s victory in court, reduced overtime work would cut salaries per employee by 1.1 million won a year. A weekend work cut also would reduce income by 1.16 million won to 4.62 million won per worker. The reduced work hour and output would naturally lead to a loss of jobs. By the end of the year, Kia would be producing as many as 127,000 fewer cars.
The management and union must fight the challenges together by improving productivity, which is the only way for the company to survive without having to cut wages. Its hours-per-vehicle — the barometer for auto worker’s productivity — is 26.8 hours for domestic factory workers for Hyundai Motor versus 14.7 hours of their peers in Hyundai Motor’s Alabama factory. They also lag behind 17.7 hours for factory workers at Hyundai’s Beijing factory and 20.7 hours in its India factory.
The carmaker may decide to close down domestic production lines if high labor-cost and low-productivity continues. This is why there are rumors that GM would pack out of Korea despite it repeated denial.
The management of Hyundai Motor and Kia Motors should promise of job security while the union vows to raise their productivity. We hope Kia’s decision to stop overtime work leads to improving productivity at domestic assembly lines of our car industry.
JoongAng Ilbo, Sept. 23, Page 30