Hyundai Rotem to undergo stringent restructuring

Workforce downsizing, wage cuts expected to draw labor protests

By Lee Hyo-sik

Hyundai Rotem is set to subject itself to stringent restructuring in a bid to cope with its faltering business at home and abroad.

The rolling stock manufacturing arm of Hyundai Motor Group said Tuesday that it is seeking to dismiss 1,000 workers through a voluntary retirement program, the first of its kind since 2004. Its current workforce stands at 8,000.

Hyundai Rotem, headed by CEO Kim Seung-tack, is also expected to downsize its business units and cut employee wages.

“We are receiving applications from senior employees who want to retire early,” a company spokesman said. “A consulting firm is currently examining our organization and will soon tell us what needs to be done. We will then make public what we are going to do to become a more efficient and profitable entity.”

However, the restructuring move has invited protests from unionized workers who demand higher wages and better working conditions, despite the firm’s worsening financial health. Management and the union have yet to complete last year’s wage negotiations.

“Unionized workers, many of whom will reach 60 in a year or two, are asking for excessive wage hikes, while disregarding how dire the situation is for the company,” the spokesman said. “Management is determined to take all possible measures, no matter how painful they may be, to transform the firm into an efficient and profitable organization.”

Hyundai Rotem has been facing criticisms for not doing enough to enhance its competitiveness and bolster its bottom line. Instead, it has been asking the government for financial and other forms of support.

The company has been saddled with a high-cost, low-efficiency structure, adding that employee salaries have gone up regardless of business performance.

Over the past two years, the railway car manufacturer has seen its sales plunge in key overseas markets such as the United States, Brazil and India.

It previously won many overseas production orders for subway carriages and other types of rolling stock. However, the firm has begun losing its global market share to rapidly growing Chinese competitors, including the CRRC, which have posted explosive growth on the back of the Chinese government's extensive support.

In 2015, Rotem secured only 80 billion won in new orders from Turkey to maintain a tram route there, down from 600 billion won in 2014 and 1.4 trillion won in 2013.

In the first half of 2015, the company posted a 13 billion won operating loss. In 2014, it lost 12 billion won.

Despite its worsening performance, Rotem has been raising employee wages. Its average annual employee salary stood at 90 million won in 2014, up from 86 million won in 2013 and 82 million won in 2012.