Hyundai fires 1,569 who declined to retire New labor laws let automaker trim big payroll

August 01, 1998|By BLOOMBERG NEWS

SEOUL, South Korea -- Hyundai Motor Co. fired 1,569 workers yesterday -- 4 percent of its work force -- by making use of new labor laws to cut wages and weaken its powerful unions.

The sacked workers all rejected early retirement offers of up to 10 months' salary, said Min Kyung Hwan, a spokesman for Korea's biggest auto manufacturer. More than 6,000 employees already had accepted early retirement.

The job cuts will trim Hyundai's monthly 100 billion won ($80 million) wage bill and help the company ride out Korea's deepest recession in four decades. Hyundai's domestic sales halved this year, forcing the company to operate at just 40 percent of capacity, a record low.

Events at Hyundai could make or break Korea's bid to overcome its economic crisis as it is the first big company to fire workers en masse in a country used to lifetime employment. Unless Hyundai and other Korean companies are able to solve labor disputes, they will be unable to attract the foreign investment they need to rebuild their businesses after years of reckless expansion.

"Hyundai has given a green light for other Korean companies to conduct mass layoffs later in the year," said Namuh Rhee, an executive director at Samsung Securities Ltd.. "Production will remain at these low levels for 12 to 18 months so the company can make big savings on wages."

Hyundai shares fell 2.7 percent yesterday, to 14,200 won.

Before March this year, companies couldn't fire employees without the consent of labor unions. A law providing for greater labor market flexibility was part of Korea's commitment to the International Monetary Fund when it sought a record $60 billion bailout of its economy last December.

Hyundai has a long history of clashes with unions. The company lost $700 million of production at the start of last year when union members protested the government's plan to revise labor laws and make it easier to fire employees.

Labor officials said they will remain on strike until the company abandons the layoffs.

"We will fight to the end; the company is unwilling to negotiate," said Lee Hyun Woo, deputy president of Hyundai's labor union.

Hyundai closed its plants until Aug. 9 after the latest strike turned violent, leaving three managers in hospital.

Pub Date: 8/01/98

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