Representatives of auto parts manufacturers partnering with Hyundai Motor Company, Kia Motors, GM Korea and Ssangyong Motors held a press conference on April 15 at the main office of the Korea Auto Industries Corporation Association (KAICA) located in Seoul, demanding that the new bill for an expanded scope of ordinary wage be revised in a rational way that does not strangle the auto parts industry.
“The government and the political community have to suggest negotiation standards and guidelines so that the labor-management talks over the new wage system can be smooth, while defining the obligation of labor unions’ cooperation to prevent any excessive backdating of the bill,” KAICA President Shin Dal-seok emphasized. He added, “When regular bonuses are included in the ordinary wage, the auto parts industry has a burden of 591.4 billion won [US$569.9 million] of additional labor costs each year, with the labor cost growth rate reaching as high as 9.4 percent, and the amount will snowball year after year.”
He also mentioned that the increase in labor cost would result in weaker price competitiveness, which, in turn, would lead to an increasing ratio of buy-back, that is, imports from overseas manufacturing bases to Korea. “According to our estimates, 7,516 jobs will disappear every year due to the expanded ordinary wage and employment costs, and the technical investment is expected to fall by 13 percent, while exports decline by 375.5 billion won [US$361.9 million] a year,” he continued.
Another concern is side effects such as the shrinkage of the domestic market and a widening gap between the wage levels of automakers and auto parts manufacturers. The president pointed out that this would undermine the joint growth policy of the government to cause the entire auto industry of Korea to collapse in the long term.
He also expressed his grievances as to ongoing discussions for shorter working hours. “The production volume falls 13.7 percent and the monthly average salary is lowered by 300,000 won if weekly working hours are reduced from 68 to 52 hours,” he stressed, adding, “In the end, industrial competitiveness will be compromised to lead to less exports, more idle facilities and large-scale layoffs.”