Prolonged workers' strike forces Kumho to shut down its tyre plants

After prolonged strike, Kumho Tire shut down its plants on Sunday morning. The conflict between Kumho's management and workers is due to the new peak wage system the company is trying to implement.

Korea's second-largest tyre manufacturer said that it has closed its plant in Gwangju, South Jeolla province, Gokseong and Pyeongtaek, Gyeonggi province at 7am. The company took this action to protect its facilities from the union workers. In its statement, the company said, "We closed the workplaces because we cannot sustain long-term strikes by the labor union. We also aim to protect the company's facilities."

Kumho's union workers are on the all-out strike since August 17 after having dispute over the management's idea of adopting a peak wage system that caps the salaries when the employees reach a pre-defined age.

The negotiations have not resulted in any fruitful outcome due to the differences over the compensation Kimho will pay the workers for adoption of peak wage system.

Due to the strike, it is estimated that the company has incurred a loss of 89 billion won ($75 million) whereas the average loss for each worker is expected to exceed 2.5 million won. The first quarter financial results were very poor for Kumho when it faced a sales drop of 12 per cent from the previous year's 754.4 billion won and operating profits fell to 44 billion won, a loss of 49 per cent over previous year's figures.

To increase its competitiveness, the company had discussed the idea of peak wage system during the annual wage talks. However, the unionists think that wage talks should not be mixed with the peak wage issue.

If the peak wage system is adopted then the employees must accept reduced salaries in return for the guarantee of employment till retirement. The idea behind this system is to use the saved money for hiring of young workers.