Korea Inc. bedeviled by slump, looming labor strikes

By Park Sang-soo SEOUL, Sept. 14 (Yonhap) -- South Korea's corporate sector has been increasingly beset by a set of whammies -- waning presence in the global market and falling sales at home. And more recently, many key manufacturers are set to brace for yet another stumbling block -- labor strikes. Weighed down by the global economic slump and slackened private spending at home, many South Korean firms have been suffering from a decline in sales in overseas markets and even on their home turf. The country's top 30 conglomerates suffered the severest setback last year since the 2008 financial crisis in their business results. Their combined operating income fell 4.3 percent to 57.56 trillion won (US$48.8 billion) over the cited period, and their operating margin ratio dropped to 4.3 percent from 6.7 percent. More specifically, Hyundai Motor reported a 23.8 percent on-year plunge in its second-quarter earnings, largely due to a strong won and intensifying competition at home and abroad. Net profit came to 1.79 trillion won during the April-June period, compared with 2.35 trillion won a year earlier. In its latest effort to shore up sales in China, one of its key overseas markets, Hyundai Motor sharply cut prices of some models there. In August, Hyundai Motor suffered a 27 percent on-year drop in its sales in China at 96,154. The situation is no different for the country's major shipyards. Hyundai Heavy Industries Co. and two local rivals are expected to log record losses this year. The country's big three shipbuilders, including Daewoo Shipbuilding & Marine Engineering Co., are forecast to rack up a combined loss of up to 6 trillion won for the year. They have already suffered a combined operating loss of 4.7 trillion won in the first half of 2015. Daewoo Shipbuilding, which posted an operating loss of 3.03 trillion won in the second quarter, down from an operating income of 103 billion won a year earlier, is set to roll out the biggest restructuring efforts among the three. Exports, a key driver for the country's growth, have fallen this year as growth in China slowed and Japanese firms boosted their presence in the global market on the back of a weak yen. Private spending in Asia's fourth-largest economy fell 0.3 percent in the second quarter from the previous period. Further exacerbating the problem, key manufacturers are embroiled in a series of labor disputes. Strikes by workers have been an annual event in the country, especially for employees at automakers such as Hyundai Motor. Workers at Hyundai Motor voted for a strike last week. If wage negotiations with management under way fall through, they are set to put down their tools at any time, which would mark the fourth straight year of labor strikes at the automaker. These labor strikes at Hyundai Motor, which occur almost yearly, have cost the company a lot in the past years. Its production losses for the past 15 years are estimated at 15.3 trillion won, which translates into roughly 1 trillion won in losses annually. Last year alone, the automaker suffered a production loss totaling 910 billion won. Employees at Hyundai Motor are some of the most highly paid in the country, with their average annual salary last year hovering above 90 million won, according to industry data. Other major firms have been dogged by similar disputes. Unionized employees at Hyundai Heavy Industries Co., a major shipyard in the country, also has been staging partial strikes since last month demanding a pay raise and better working conditions. They are set to launch their fourth round of partial strikes this week. Kumho Tire Co., the country's No. 2 tiremaker, suffered a production loss of more than 100 billion won due to a prolonged strike. The tiremaker even shut down its factories last week. The labor disputes also come as the government pushes for a labor reform drive which it believes will make the country's labor market more flexible and generate more jobs needed, especially for young people. President Park has been repeatedly preaching a stronger push to change what she describes as malpractices in the country's labor sector. The government wants wages that are set based on a worker's performance rather than seniority, and to make it easier for a company to recruit and sack workers. Among other things, the government is prodding public firms, even private firms, to adopt the so-called peak wage system, thus creating more job opportunities for young people. The peak wage system allows employees to accept reduced salaries in exchange for working until the retirement age set by the company. The union says it should not be a part of wages negotiations. sam@yna.co.kr (END)