October 02, 2018 13:12
Jobs are declining in the Korean car industry as both exports and domestic sales dwindle.
In August, Korean carmakers hired 391,000 workers, down 9,000 compared to the end of 2017 and the biggest decline in any industry except the ailing shipbuilding sector.
Korea's car production peaked at 4.56 million vehicles in 2012 but fell to 4.11 million last year as more and more Korean cars are being made abroad. Total output at home is expected to reach barely four million this year, a level last seen in 2010.
The operating margins of Hyundai and affiliate Kia have dropped to the two to three percent, which means they are barely able to cover interest on their debts. GM Korea nearly went bankrupt before it was resuscitated by emergency funding from the government and GM headquarters. Parts suppliers are facing a domino effect of bankruptcies as the minimum wage hike and shorter working week bite into earnings.
A study by the Korea Institute for Industrial Economics and Trade showed that the operating profits of 82 out of every 100 Korean car parts makers halved in the first half of this year, while 31 posted operating losses.
But the Labor Ministry continues to pressure automakers and parts suppliers to raise wages and give temporary workers permanent jobs. The ministry told GM Korea to hire 1,600 workers at parts suppliers and tallied the number of contract workers at parts suppliers.
The crisis in the automobile industry is a huge blow to the Korean economy. Its direct hires are still three times higher than the shipbuilding industry's 128,000 workers and it affects 1.77 million jobs if related businesses like transportation, repair, dealerships and parts are included.
The auto sector accounts for 11 percent of Korea's total exports, but total exports rose 7.7 percent in the first nine months of this year while car shipments fell 5.1 percent.
Kim Soo-wook at Seoul National University said, "Declining jobs may be signaling a bigger shock in the auto industry, which is one of the major pillars of our economy along with semiconductors. It should be taken very seriously since a shock in the industry could result in a devastating economic crisis."
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