Sales Staff Protests Block Porsche Inroads in Korea

A labor dispute is disrupting sales of Porsche cars in Korea – not because of conflict in Germany, where the luxury sports cars are built, but because two-thirds of the company’s official distributor’s sales staff are protesting.

With 48 of Porsche distributor Stuttgart Sports Cars’ 70 sales representatives demanding improved compensation and working conditions, no sales leads are being pursued and no orders are being written.

Established in May 2014, their labor union and SSC have made no progress in negotiations that began in February. Members in natty business suits have been demonstrating outside SSC headquarters in Porsche Tower in Seoul’s upscale Gangnam district and at the company’s other five dealerships.

Graeme Hunter, president and CEO of SSC, has threatened to sue anyone responsible for demonstrations or strikes resulting in damage to the company.

Although Porsche has only 1.8% of Korea’s import market, it has seen sustained growth in both sales and revenues.

Driven by SSC, which operates six of the country’s 10 Porsche dealerships, the automaker combined for 1,641 deliveries in the first five months of 2015, up 25.8% from year-ago, according to WardsAuto data. Sales of the pricey vehicles in 2014 totaled 2,568 units, also up 25.8% from 2,041 in 2013.

Demonstrations that might affect the canvassing and writing up of sales orders, discourage would-be buyers or interfere with service could cripple Porsche’s image among sports-car enthusiasts and affluent potential customers.

Leaders of the sole union representing employees of Korea’s car-import sector say the dispute stems from SSC’s refusal to hear their demand for both a significant base wage and commissions that approximate 1% of a vehicle’s sale price.

Indeed, union representatives say, management is trying to reduce commissions by nearly one-third, contending the existing rate is excessive in light of the growth in sales in the past year.

Additionally, the union claims that in mid-June, shortly after taking over SSC, Hunter fired four of its leaders on what they say were trumped-up charges.

The four included Kim Chang-kyu, president of the union and one of SSC’s best-ever sales performers. In 2014, Kim received a Porsche “sales king” award for selling more than 70 of the vehicles and generating more than $7 million in revenue for Porsche.

Kim says some Porsche sales consultants suffer during a downturn because they totally rely on their 1% commission. Thus, a consultant who sells $1 million in product in a year’s time will earn $10,000.

Selling luxury cars is a cutthroat business for competing sales consultants, Kim says, noting a consultant sometimes will split his commission with the buyer as an additional incentive to close the deal.

Hunter counters the four unionists were fired for “departing from internal ethics.” He claims Porsche sales consultants earn more commission income than those of competing import distributors and are fairly paid and dealt with.

Privately held SSC operates in tandem with the automaker’s Porsche Korea subsidiary established in January 2014. Under Hunter’s predecessor, former president and CEO Michael Vetter, SSC accounted for more than 2,000 of all Porsche vehicles sold in Korea in 2014, or roughly 75% of sales.

Vetter, who headed Porsche operations in Korea when it sold just 705 vehicles as recently as 2010, now heads the automaker’s one-dealer distributorship in Cambodia.

Kim says the union at SSC is laying the groundwork for better compensation and working conditions for sales consultants at Korea’s 14 other car importers. And those companies are closely watching the situation at SSC.