Top Brass at Hyundai Motor Group Take 10% Pay Cut

All of Hyundai Motor Group’s executive personnel are taking voluntary 10% cuts in their salaries in what a spokesman calls a heartfelt effort to shore up Korea’s national economy in addition to their own companies.

“The voluntary pay cut is effective this month for an unspecified duration,” the spokesman tells WardsAuto. Participating are executives at Hyundai Motor, Kia Motors and the 50-plus major affiliated companies within the Hyundai Group. The automaker’s affiliated financial companies also are involved.

The voluntary action applies only to Hyundai Motor Group and its affiliates within Korea and not to any of the automaker’s overseas joint ventures, subsidiaries or affiliates.

Korean news media report about 1,000 executives are involved. The spokesman declines to say how much money the pay cuts are saving any one of the companies or the group as a whole.

But he notes, “There is a certain cultural element in this,” saying there is widespread feeling that Korea’s economy is in trouble and the voluntary pay cuts extend beyond Hyundai to help the nation recover.

Analysts believe Hyundai’s move will inspire other managers and workers to make their companies more productive and competitive for the good of both their employer and the country.

However, the spokesman tells WardsAuto the voluntary wage reduction applies to all individuals at the director level and above, which on the face of it may mean the 1,000 figure is too low.

At Hyundai and Kia, for instance, the executive ranks begin at director, which is one level above general manager, the most senior middle-management position.

From director the executive ranks ascend through vice president, senior vice president, executive vice president, president, vice chairman and chairman.

In Korea a company can have multiple executives with the same title. For instance, Hyundai Motor has several executive vice presidents and several presidents, each with different responsibilities.

The “cultural element” the spokesman referred to was seen after the 2007 financial crisis, when Koreans lined up by the thousands to voluntarily donate gold earrings, rings and school pins to the government to assist in the country’s economic recovery.

The top executives’ action is in stark contrast to that of unionized workers at both Hyundai Motor and Kia. Both companies have been hit this year with the longest continuous partial-strike action in their history as their unions fought for bigger paychecks.

The 12 weeks of strikes at Hyundai, settled Oct. 14, cost the automaker 142,000 units of production valued at 3.1 trillion won ($2.8 billion). In addition to the lost production, which curtailed sales, Hyundai also will have to pay out signing bonuses and cumulative pay raises stipulated in the new wage agreement, which will impact its bottom line in fourth-quarter 2016.

The union still has not settled at Kia, which has suffered similar strike action. Kia has not released figures on production losses, but the unions’ actions parallel what has happened at Hyundai.

Second-quarter results released in July saw Hyundai Motor post its 10th straight quarterly earnings decline. Company executives warned business conditions were expected to deteriorate through the end of the year because of global economic uncertainties.

Analysts predict Hyundai’s year-over-year net-income drop for the third quarter will be much sharper than the 1.5% decline reported in the second quarter.

Since the second-quarter report was issued Hyundai has been plagued by sluggish and negative sales in developing overseas markets such as Russia and Brazil, in addition to the strikes depressing production and sales.

Hyundai Motors’s third-quarter net profit fell 23% from year-ago, according to a Reuters report.

Kia, impacted less by labor difficulties like those experienced by Hyundai, reported third-quarter net profit rose 20.8% year-on-year despite a 3.1% drop in sales, The Korea Times reported.