Kia, Union Reach Tentative Contract Agreement

Kia reaches a tentative agreement with the Korean Metal Workers Union, setting the stage for an end to four months of negotiations that saw the strikes and labor unrest that disrupted operations at affiliate Hyundai.

The tentative deal at Kia exactly parallels the main terms of the now-ratified Hyundai contract.

As with Hyundai, if the deal is approved, Kia’s KMWU members will receive a monthly wage increase of 72,000 won ($63), 3-½ months’ salary and 3.3 million won ($2,900) in incentive bonuses.

Union sources say Kia workers will not announce the results of their ratification vote until next week.

While the Kia strikes have gained less media attention than those at Hyundai, Kia’s losses have been proportionate to those of Hyundai.

Industry sources say Kia has lost production of 64,000 vehicles valued at 2.1 trillion won ($1.84 billion). Hyundai, which has double the production capacity of Kia in Korea, lost almost exactly twice as many builds: 130,000 vehicles valued at 3.1 trillion won ($2.7 billion).

For the past two years, Kia and its labor union have kept details of wage negotiations a secret. Both sides even have refused to say negotiations were taking place or to confirm the partial strikes that were impacting the automaker’s operations.

However, after last week’s release of Kia’s third-quarter earnings, Chief Financial Officer Han Chun-soo reported the result was impacted not only by the 64,000-unit production loss but also by the Korean won’s strength against other currencies and the end of a government vehicle-purchase incentive in June.

Kia’s Korean plants accounted for 52.2% of the automaker’s global output in the year’s first nine months, down 10.6% from a year earlier. Production at plants in the U.S., China, Slovakia and Mexico increased, significantly bolstered by the new Mexican plant coming on stream.

Kia’s third-quarter operating profit was reported at 524.8 billion won ($459 million), a decline of 22.5%, while revenue was down 3.1% to 12.7 trillion won ($11.1 billion).

A Hyundai Motor Group spokesman says both companies may well miss their full-year 2015 sales targets.

The dismal quarterly result didn’t stop union workers from authorizing four additional 4-hour strikes before the tentative deal was reached.

The raises at both Hyundai and Kia come during one of the worst economic downturns faced by Korea since the 2007 Asian financial crisis, which resulted in Kia going bankrupt and subsequently acquired by Hyundai Motor Group.

Senior executives at both Kia and Hyundai last week voluntarily took immediate 10% wage cuts to help the automakers and the Korean economy through the rough period ahead.