Mercedes-Benz Korea criticized for 'excessive' dividend payments to headquarters
In contrast, BMW pays no dividends to expand local operations
By Lee Hyo-sik
Dimitris Psillakis
Kim Hyo-joon
Mercedes-Benz Korea (MBK), headed by CEO Dimitris Psillakis, is facing mounting criticism from civic groups and others for having paid “excessive” dividends to its headquarters.
In contrast, BMW Korea, headed by CEO Kim Hyo-joon, has not paid any dividends to shareholders in Germany since 2010 in order to build a driving center and other business-related facilities here, as well as hiring more workers.
According to audits released by the Financial Supervisory Service, Thursday, MBK sent 58.5 billion won ($51 million) in dividends to its shareholders in Germany last year. This is equivalent to 66 percent of its 88.7 billion won net profit. In 2014, the German auto brand paid out 50 percent of its net profit in dividends.
This suggests that MBK decided to send more money back to its German headquarters rather than invest more locally to hire employees and expand its business.
In 2015, company sales jumped 42.5 percent to 3.14 trillion won, but its net profit fell 8.8 percent to 88.7 billion won. This indicates that CEO Psillakis who took the helm last September focused more on increasing the number of cars sold rather than bolstering company profits.
In addition, Audi-Volkswagen Korea also paid 16 billion won, or half of its 2015 net profit, to its German headquarters for the first time since its establishment here in 2004.
The German auto brand’s sales rose 5.9 percent to 2.8 trillion won, but its operating profit and net profit declined 13.6 percent and 20.6 percent, respectively, as it had to lower vehicle prices to boost sales amid its unprecedented emission cheating scandal last year.
Porsche Korea also paid all of its 60 billion won net profit in dividends to its shareholders abroad. Last year, the company sent 10.8 billion won, or 90 percent of its 12 billion won net profit, abroad.
The German brands say that they made dividend payments in accordance with their headquarters policies.
But critics say that instead of sending the lion’s share of their earnings back to their headquarters in Germany, the companies should expand investment here and give more back to local communities.
“Normally, global automakers pay about 25 to 30 percent of their net profits to shareholders as dividends,” said an auto industry analyst who declined to be named. “But German auto brands in Korea are paying more than 50 percent of their profits in dividends. Some even send all of their profits back to headquarters. This is just too much.”
The analyst said instead of taking money out of the country, foreign carmakers should pay more attention to building more facilities and employing more workers.
In contrast to MBK, Audi-Volkswagen and Porsche, BMW Korea decided not to pay dividends to its shareholders in Germany. The company hasn’t sent money back to Germany since 2010.
BMW had 2.88 trillion won in sales last year, up 25 percent from 2014, while its net profit doubled to 46.4 billion won. But instead of taking the money out of Korea, the German brand decided to enlarge its operations here.
It plans to invest 130 billion won to construct a large-scale auto parts warehouse to improve its after-sales service. In 2014, it opened a driving center on Yeongjong Island, Incheon, becoming the first imported car brand to do so.