International Law

SsangYong Motor Situation Getting Tricky

SsangYong Motor Company (SYMC), Korea’s fifth carmaker and a holdover “zombie” company from the 1998 financial crisis, appears to be on the brink of bankruptcy, with its major shareholder Shanghai Automotive Industry Corporation, apparently having had enough of the company and its union, threatening to walk away from the company and to allow the company to go bankrupt.

Will this contribute to a reordering of the Korean labor market?

Probably not. There is an important difference between the US Bankruptcy Code and the Korean “Bankruptcy Act” (the “Debtor Rehabilitation and Bankruptcy Act”—uggh), and that is the express prohibition on the Korean bankruptcy trustee touching the Collective Bargaining Agreement or company Work Rules (see Bankruptcy Act, Art. 119, para (4)).

In the US, politicians’ lack of appetite for facing the United Auto Workers union is what’s kept GM, Ford, and Chrysler away from the court. Under the Bankruptcy Code, the toxic labor agreements which most generally agree to be the problem for the Detroit Three (I’m old enough to remember them as the “Big Three” but those days seem to be gone) automakers can be torn up and thrown out by the court.

Every other contract but those collective labor agreements is fair game in Korea. The labor union cannot be forced to yield anything in a Korean bankruptcy. The Korean politicians, you see, are really afraid of the unions—and for good reason, as when the bill was drafted (I was a small part of that work) the spectre of whose offices would get invaded by lead pipe-wielding trade unionists was what drove the inclusion of the prohibition on touching the collective agreements.

There is also a requirement under Korean law (see Bankruptcy Act Art. 227) that the reorganization plan be given to the union for its input (not approval, expressly, but “consultation” with the union), and the court to hear the opinion of the union.

So bankruptcy will not be able to reorder SsangYong Motor Company, Korea’s “zombie” carmaker, if the union contracts are a significant contributing factor to the problems there. Personally, I think the problem is SYMC exclusively makes horrid-looking crapmobiles (I’ve worked with European SYMC dealers, and oh, the quality problems they’ve had!) whose gas consumption was hard to justify during the oil-price spike. (Gosh, that sounds familiar.) But that’s me—I’ve been a small-car guy all along.

Full post as published by Korea Law Blog on December 26, 2008 (boomark / email).