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Korean Automobile Industry Losing Efficiency
Competitive Disadvantage
Korean Automobile Industry Losing Efficiency
  • By Jung Min-hee
  • September 9, 2015, 04:45
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Cars are parked at Pyeongtaek's Dangjin Port.
Cars are parked at Pyeongtaek's Dangjin Port.

 

Korean automakers are paying more to their employees while showing a lower level of productivity in comparison to global market leaders such as Toyota and Volkswagen.

[[{"fid":"12793","view_mode":"body_image_right","fields":{"format":"body_image_right","field_file_image_alt_text[und][0][value]":"The average annual salaries of Korean workers are now higher than those in Japan.","field_file_image_title_text[und][0][value]":""},"type":"media","attributes":{"alt":"The average annual salaries of Korean workers are now higher than those in Japan.","height":471,"width":450,"class":"media-element file-body-image-right"},"link_text":null}]]According to the Korea Institute for Industrial Economics and Trade, the average pay of domestic automobile industry employees amounted to 92.34 million won (US$77,551) last year, much higher than Toyota’s 8.38 million yen (US$69,640) or Volkswagen’s 64,783 euros (US$72,368). Also, the yearly pay of Korean workers increased by an annual average of 6.6 percent from 2007, whereas that of Toyota decreased from over eight million yen to 7.1 million yen between 2008 and 2009, and that of Volkswagen increased at an annual average of only 2 percent or so.

This has caused Korean auto companies' wage-to-sales ratio to reach 12 percent, exceeding those of Toyota and Volkswagen by a margin of 4.2 and 1.4 percentage points, respectively. In the Ulsan plant of Hyundai Motor Company, the ratio amounted to 14 percent.

Nevertheless, the Korean automakers’ productivity is continuing to decline. Their average sales per employee are US$627,417, while that of Toyota, Volkswagen and GM are US$1.34 million, US$719,852, and US$812,843 each. The Korean carmakers’ domestic production volume edged up by 0.1 percent, but the overseas production jumped 7.4 percent in 2014. Their export volume reached a peak of 3.17 million cars in 2012, before dropping to 3.06 million in 2014. GM Korea’s exports plummeted from close to 700,000 cars to around 480,000 between 2013 and last year. The institute pointed out that Korean manufacturers need to evaluate the cooperative labor-management relations of their global rivals in order to get rid of inefficiency.