1. Introduction
As the economy becomes more difficult, companies try to survive by reducing costs, especially with labor being the item that costs a company the most. Low labor costs help to overcome difficult times, thereby increasing the likelihood of survival. Restructuring is utilized by companies as a short-term effort to reduce labor costs. This restructuring can include unpaid leave, voluntary resignations, layoffs, etc., with layoffs being used as a last resort whenever possible. Before the economic crisis in 1998, the concept of a lifelong workplace was established along with the rapid growth of companies, and most employees continued to work until retirement; the laws and the system were set accordingly. However, during the economic crisis, the managerial dismissal law and the dispatched workers law were introduced as conditions necessary for procuring an IMF loan. Most of the companies suffering from the economic crisis chose to dismiss a large number of workers by using the managerial dismissal law (among other various methods of restructuring), and then, as the economy recovered, began using fixed-term workers or dispatched workers with lower labor costs instead of full-time workers. This type of employment raised concerns that all workplaces would use irregular workers only, and in order to cope with this trend, in 2007 the Non-regular Worker Protection Act was enacted to restrict the use of non-regular workers.
This type of employment has led to the establishment of dual employment structures in Korea. Full-time employees in large corporations are groups that receive stable employment and high wages, while non-regular workers are groups that receive insecure employment and low wages. The restructuring of SsangYong Motor is a typical example of the adverse effects of this dual structure. During and since restructuring in 2009, more than 30 workers have tragically committed suicide over nine years, as a large number of workers in the first group were dismissed for managerial reasons and demoted to the second group. I will attempt to determine the most suitable restructuring methods by analyzing the restructuring of SsangYong Motor and by comparing that case with another in a foreign country.
2. SsangYong Motor's restructuring: Layoffs
SsangYong Motor has changed ownership (and names such as Shinjin Motors and Dongah Motors in the 1970s and 1980s), and eventually came to belong to the SsangYong Family Group in 1988. SsangYong Motor produced the Musso SUV in 1993 through technical cooperation with Mercedes Benz in Germany, and then produced the new Korando in 1996, making the company a representative maker of 4WD automobiles.
However, since 1992, deficits had accumulated and the company was sold to Daewoo Motor in 1998. When Daewoo went bankrupt in 1999, SsangYong Motor was moved to court administration and then sold to Shanghai Motor Company in 2004, after its management status had improved thanks to the court administration. After this, Shanghai Motor did not invest in new car development for four years and was placed into administration in court in 2008. Shanghai Motor withdrew from the Korean market, taking with it only current SUV technology and key personnel.
In April 2009 SsangYong Motor announced that it would cut 2,646 people (out of 7,135) in order to normalize management. In May 2009, the union took over one of plants in the Pyeongtaek factory, went on strike and proceeded to occupy the plant for 76 days, until August. The strike was stopped after a police suppression operation and successful negotiations between the union and the company. As a result, out of the original 2,646 employees, 2019 voluntarily resigned, 459 were put on unpaid leave, 3 were switched to the sales team, and 165 (159 production and 6 management) employees were laid off.
A total of 156 persons dismissed for managerial reasons filed suit against the company in November 2010 for invalid layoff.
On 1 August 2012, the court of First Trial said, "As a result of the financial crisis, there is no way to solve a liquidity shortage, and a company that is going through the regeneration process is forced to overcome the difficulties in management and lay off as part of restructuring to secure competitiveness through cost reduction. It is recognized that there is a necessity to carry out managerial dismissal."
On February 7, 2014, the Court of Second Trial (the High Court) said, "The 'Court of Appeal' has no problem in meeting the requirements related to the selection of the dismissal candidates and the consent of the collective agreement. However, it is not clear that the actual requirements of dismissal as an effort to avoid dismissal are not implemented, and so this managerial dismissal has not satisfied the validity requirements of managerial dismissal as provided in Article 24 of the Labor Standards Act."
On November 13, 2014, the Court of Third Trial (the Supreme Court) said that that the "urgent management necessity" among the requirements of managerial dismissal should respect the judgment of management unlike the ruling of the High Court. In the judgment of "urgent management necessity", it is a requirement for judging the legitimacy of managerial dismissal. The existing interpretation in the Supreme Court accepts that there is objective rationality in order to cope with a crisis that the company may have in the near future. And this concept is also reaffirmed in this Supreme Court ruling.
In November 2010, SsangYong Motor was sold to Mahindra in India. Since then, SsangYong Motor has gradually reinstated workers previously placed on unpaid leave and dismissed other workers, in line with the company's business status. Following the reinstatement of 454 of the unpaid leave personnel in March 2013, 40 people were reinstated in February 2016, 62 in April 2017, and 16 in 2018. In September 2018 the company also agreed to complete the reinstatement of the remaining 119 dismissed workers by the end of the following year. This reinstatement was possible through the improvement in the management status of the company. As company sales improved (a deficit of KRW 141.2 bn in 2011, a deficit of KRW 9.9 bn in 2012, a deficit of KRW 8.9 bn in 2013 and finally a surplus in 2016), it outperformed GM Korea and Renault Samsung Motors, achieving third place in the domestic market in September 2017. (1st place was Hyundai Motor Company, and 2nd place was KIA Motors).
3. Volkswagen restructuring:Job sharing
Volkswagen was founded as a German state-owned enterprise in 1937 under Adolf Hitler's Nazi government. After privatizing its shares in 1960, it became the largest automaker in Europe following the acquisition of the Audi Group in 1969 and Skoda in 1990.
In 1993, Volkswagen reached a peak of 103,000 employees in Germany, but the factory made no profit at all. Wages of workers comprised 25% of sales (its ratio of wages vs. total sales was 20% higher than competitors such as Ford and Opel), and their productivity was the lowest in the industry. In 1992 Volkswagen's net profit was only 147 million marks, a drop of 87% from the previous year, and became a deficit of 1.94 billion marks in 1993. This was a result of the fact that Japanese car companies had entered the European market in full swing and the company could not handle the aftereffects of the collapse of the economic bubble which occurred after German unification. German media at the time pointed out that Volkswagen should take restructuring measures as soon as possible.
Volkswagen announced plans to cut 30% of its German workers (about 31,300) by 1995. The union, after consultation with the company, chose to shorten the working hours without wage maintenance, instead of dismissal. In November 1993, Volkswagen signed a labor-management agreement to strengthen job security and competitiveness after bargaining for
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