Kia, Prolonged Labor Negotiations Possible... Persistent Differences Over New Car Discounts

Negotiations Resumed After 2 Weeks but Differences Remain
Tight Standoff Over Long-Term Service Retirement Discounts
Electric Vehicle Discounts: 'Current Employees First' VS 'Equal for All'

[Asia Economy Reporter Kiho Sung] There are growing prospects that Kia’s wage and collective bargaining agreement (wage and labor agreement) for this year may be prolonged. Despite one round of rejection of the proposed agreement, labor and management have yet to narrow their differences over the contentious issue of reducing the “Lifetime Employee ID” system. Positions also diverge regarding electric vehicle discounts, leaving both sides struggling to find a resolution.

According to the automotive industry on the 27th, the 11th main negotiation session was held on the 22nd at the Sohari Plant headquarters. Although the session was held at the request of management, both sides reportedly emphasized their existing positions.

Earlier, on the 30th of last month, Kia labor and management reached a tentative agreement through the 10th main negotiation session. The agreement included a base pay increase of 98,000 KRW (including seniority increments), a management performance bonus of 200% plus 4 million KRW, a production and sales target achievement incentive of 100%, a special quality brand improvement incentive of 1.5 million KRW, traditional market gift certificates worth 250,000 KRW to revitalize the local economy, and provisions for securing funds for allowance increases.

However, union members rejected the agreement due to opposition to the reduction of benefits under the “Lifetime Employee ID” system. Hyundai Motor and Kia operate a Lifetime Employee ID system that allows retirees with over 25 years of service to purchase vehicles every two years at discounts of 25% and 30%, respectively. Through this year’s wage and labor agreement, Kia labor proposed limiting the benefit age to 75 instead of lifetime and reducing the discount rate to 25% of the vehicle price. In exchange, the base pay for 60-year-olds (retirement age) was raised to 95% of the 59-year-old worker’s base pay, up from 90%, in line with the wage peak system.

During the negotiation, management argued, “A system that goes against public sentiment will not be understood by the public,” and “The cost of discounts for retirees is less than the cost that goes to current employees through the first tentative agreement.” Management stated that discounts for electric vehicle purchases through the Lifetime Employee ID would be prioritized for current employees, while retirees’ situations would be considered later. However, the union insists, “Current employees and retirees must be treated equally regarding electric vehicle purchases,” refusing to back down.

Industry analysts suggest that the union’s insistence on maintaining the discount system stems from the pyramid-shaped age distribution of employees within the company. As of last year, 18,874 employees aged 50 or older accounted for more than half of the total workforce of 34,014 at Kia’s domestic operations. The average length of service for all employees is 22 years and 2 months. This indicates that most union members have fewer years left to work than they have already worked, making them particularly sensitive to post-retirement benefits.

Within the industry, there are concerns that this wage and labor agreement could potentially spark intergenerational labor conflicts among Kia union members. Differences in desired benefits between senior union members nearing retirement and relatively younger union members raise concerns that younger members might be disadvantaged.

Since the collective agreement was rejected, the union has taken a more hardline stance. After the 11th main negotiation session, the union stated, “Management has not presented any proposals regarding the electric vehicle purchase and retiree discount system, which are the causes of the rejection,” and warned, “If management persists, the union will clearly escalate its struggle against management.”