April 21, 2024

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[THE INVESTOR] Kia Motors, the nation’s second largest carmaker, is considering eliminating overtime production at its local facilities, partly due to rising labor costs after losing a multibillion-won wage lawsuit. 

“We are mulling to stop overtime at (Korean) factories,” Kia Motors Vice Chairman Lee Hyoung-keun told reporters at the Frankfurt Motor Show on Sept. 12 (local time). “The latest wage-dispute lawsuit has cost Kia about 1 trillion won (US$887.90 million) in damages.”

On Aug. 31, a local court ruled in favor of Kia Motors labor union, ordering it to pay 422.3 billion won (US$374.9 million) in unpaid wages. 

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With the ruling, the court ordered to count bonuses and lunch allowances as part of “ordinary wages,” which is used to calculate various types of compensation and overtime. As a result, Kia expects the additional labor costs emerging from the ruling to more than double, as all workers’ wages will be adjusted from now on. 

The overtime work, which is common in the automobile industry, includes work on Saturdays, Sundays and holidays. Additional 50 percent of workers’ daily wage is paid for the overtime. 

Industry watchers raised concerns that the latest wage ruling could push Korean carmakers to move their manufacturing facilities overseas to avoid labor cost burden, amid already sluggish automobile sales in the domestic and overseas markets.

By Ahn Sung-mi (sahn@heraldcorp.com)