GM Korea Workers’ Legal Win Draws Akerson’s Scrutiny

The Korea Metal Workers Union, alarmed by an exchange between General Motors CEO Dan Akerson and South Korean President Park Geun-hye, is preparing a response.

Union officials and advisors will take up the matter throughout the weekend, following statements Akerson made Wednesday during a business roundtable luncheon in Washington attended by Park.

Their feeling is that Park, in seeking to assuage Akerson’s concerns about Korean worker wages allegedly being too high, spoke in terms that could be interpreted to mean she will ask her government to intervene in litigation pending against GM Korea and other companies. The lawsuits seek back pay for overtime work.

The five worker lawsuits against GM Korea are far from rhetorical, a union source emphasizes. In one tried last year, a court sided with the workers and ruled bonuses and other, similar payments must be included in calculating the normal wage on which overtime payments are based.

Union sources say that until that lawsuit was won, GM Korea seemed complacent about the litigation. Afterward, knowing of its potential liability, the auto maker added a contingency for unpaid wages to its 2012 books.

Since its stock is not publicly traded, GM Korea’s books are not open to the public. However, the auto maker is not the sole shareholder, so the figures became available through other sources. GM Korea also shows data from its books to worker union representatives at times.

Even though GM Korea reportedly posted record revenues in 2012, it was required under accounting rules to set aside 814 billion won ($745.6 million) as an unpaid-wages contingency and therefore reported a 2012 deficit of 340 billion won ($307 million). GM Korea is appealing the decision, but the ruling and the liability remain.

In its 2012 annual report, GM notes there was a special earnings before interest and taxes (EBIT) adjustment for GM Korea’s wage-litigation charge of $336 million that was applied toward the annual financial results for General Motors International Operations.

However, union sources note, any one-time hit for retroactive unpaid overtime premiums would not recur.

With bonuses figured into the normal pay rates in future years, overtime and holiday pay premiums would be somewhat higher, but the negotiated normal pay amounts would remain constant throughout the year of the contract.

Analysts note it is essential to understand the Korean wage structure and terminology with respect to the wage situation faced by GM Korea and other companies in the country.

While Akerson complained Korean auto worker wages are “too high,” the basic wage at GM Korea is slightly less than $9 per hour, according to a KMWU source. Added to that basic wage are negotiated regular and fixed compensation such as family and position-related allowances.

When the allowances are added, the total constitutes the normal wage that is paid to the worker. The normal wage differs among individuals because of type of job, seniority and other factors.

The normal wage is the measure used for calculating overtime payments. The Labor Standard Act requires that employers pay workers at least 150% of their normal wage for hours worked at night, on holidays or on overtime beyond a regular 8-hour shift.

The court has upheld the worker's claim that annually contracted bonuses should be included in the normal wage calculation. When that is done, the overtime premium is significantly higher, and that is the amount the workers wish to recover.

Reports from the Washington meeting where Akerson confronted Park on the matter indicate the CEO primarily was concerned about the impact on future severance payments to workers.

However, severance and retirement payouts are based on what is called the average wage, calculated by determining a worker’s average monthly payment based on all income he received for the three months before the date on which the calculation is made. Income sources include contracted signing bonuses, performance-based bonuses and other one-time allowances.

The union source feels wages are not inordinately high in Korea, and notes wages paid to traditional long-term workers at unionized automotive plants in the U.S. are three times as high.

“We think our work performance is excellent and that GM should not complain about the pay GM Korea workers receive,” the source says. “Our work must be worth it in value and in quality because we produce 40% of the Chevrolet cars that GM markets all over the world.”