August 31, 2017 / 1:23 AM / 7 months ago

Blow to South Korean carmakers as workers win partial victory over Kia

SEOUL (Reuters) - A South Korean court gave workers a partial victory on Thursday in a closely watched pay dispute with Kia Motors, ordering the automaker to pay about 420 billion won ($373.33 million) in unpaid wages.

A worker repairs a roof next to a Kia Motors logo in Prague October 9, 2012. REUTERS/David W Cerny/Files

The payout, though significantly less than the roughly 1 trillion demanded by workers, is a blow to South Korean automakers as it will raise labour costs just as they are battling a sales slump in major market China.

Shares in Kia Motors were down 3.3 percent and its bigger affiliate Hyundai Motor was 1.4 percent lower after the ruling, while the wider market was flat.

The workers in their claim said regular bonuses should be included as part of a base pay used to calculate overtime, compensation for unused annual leave, severance pay and other payments.

The judge at Seoul Central District Court said it was “inappropriate” for Kia to argue that the claim posed a threat to the South Korean economy, Asia’s fourth-largest.

Kia Motors said it disagreed with the decision and was considering an appeal.

The case goes back to an original claim in 2011 of 659 billion won in unpaid wages. With interest it came to more than 1 trillion won.

The South Korean automakers’ association had warned before the ruling that the case could deal a “fatal blow” to the competitiveness of the country’s auto industry, which has been hard hit by geo-strategic tensions on the Korean peninsular.

South Korean firms like Hyundai and Lotte have been battered by Chinese boycotts and regulatory pressure over Seoul’s decision to deploy a U.S. missile defence system to counter threats from nuclear-armed North Korea.

China says the system poses a threat to its national security.

Hyundai Motor - which together with Kia is the world’s No.5 automaker - in July posted its smallest quarterly net profit in five years. Sales from its Chinese factories plummeted 64 percent in April-June alone

($1 = 1,125.0000 won)

Reporting by Joyce Lee and Hyunjoo Jin; Writing by Jane Chung; Editing by Stephen Coates

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