Faced with a prolonged slump in the manufacturing sector, Doosan Group froze wages for its affiliates this year.
As a pre-emptive measure to take on challenges amid a drop in confidence among its chief international competitors, the country’s mid-sized conglomerate has chosen to cut wages as a short-term solution.
Except for the group’s advertising arm of Oricom, the group’s other affiliates will be affected by the freeze, said sources directly involved with the issue, Sunday.
«The market growth in businesses that Doosan operates has flattened due to fierce competition and increasing uncertainties. This situation is forcing the group to save expenditures in operations and to cut other fixed costs,» said one source.
Doosan Group’s major affiliates have an annual wage system whereby employees’ salaries are negotiated after performance evaluations in June.
This year, the conglomerate carried out the consultation sessions with the workers, but it didn’t lead to wage hikes.
Such moves are intended to prepare for the worst because the group is being urged to address growing challenges in key markets in which the group units are involved.
They also expect that although annual wage talks with the employees in the production lines have not yet been concluded, they will see similar results.
«Except Doosan Heavy Industries, which has been gradually recovering since last year, most of Doosan’s affiliates seem to be having a hard time this year,» said another source familiar with the situation.
As Doosan Group’s key businesses are heavily involved in business-to-business (B2B) segments, its annual profits are subject to changes of external uncertainties such as a downturn in the global economy doosan colombia.
Doosan Infracore, a construction equipment maker, has been hit hard by the economic slowdown in China. Last month, the company let go some 200 employees via a voluntary retirement program to cut costs. Infracore’s sales in China remained at 800 billion won last year, from almost 2 trillion won at its peak.
Doosan Heavy Industries, burdened with the economic slump and sudden cancellation of contracts, failed to meet its annual sales target last year.
Of the 10 trillion won worth of orders it was pledged for the year, it only made contracts that totaled 7.8 trillion won. According to the half-year report in 2014, it shed some 800 employees so far.
Doosan Engine, which manufactures engines for vessels, also posted losses in the first half of this year. Its per-share value closed at 4,515, last week, compared with over 30,000 won in early 2011.
Some others view that the salary freeze is related to the peak wage system that the company is expanding to all its affiliates from January next year.
The company’s core affiliates have adopted the peak wage system, where the retirement age has been raised to 60 from 57, in exchange for salary cuts.
With the peak wage at 57, employees receive 80 percent of the peak wage at 58 and 70 percent between 59 and 60.
«In line with the upcoming peak wage system, most of the businesses tend to freeze base pay for their employees. Doosan’s move could be part of that, exchanging the longer employment with salary adjustments,» the sources said.
