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Court ruling on ordinary wages 'credit positive' for Hyundai

Moody's Investors Service, a global credit rating agency, said Monday the recent court ruling on ordinary wages for Hyundai Motor Co. employees is "credit positive" for the automaking giant since the resulting extra cost will be "manageable."

On Friday, a Seoul court ordered Hyundai Motor to include regular bonuses as part of ordinary salaries for only a small number of employees, reducing the potential extra cost for the country's largest automaker from trillions of won to roughly 11 billion won ($10.2 million).

The ruling is seen as a victory for Hyundai Motor, which would have had to extensively pay its employees more since including regular bonuses in salaries would also drive up the retirement fund and the amount of other fringe benefits.

"The South Korean court's ruling on ordinary salaries for employees of Hyundai Motor Co. is credit positive for the automaker," Moody's said in a press release.

"According to the ruling, the majority of Hyundai Motor's workers will not be entitled to the bonus payment or receive regular bonuses as part of ordinary salaries. Given this situation, any future increase in wages as a result of the ruling will be manageable."

The agency cited market estimates that only 8.7 percent of Hyundai Motor's unionized workers are eligible for increased ordinary salaries based on the ruling.

It also noted that such cost is "negligible," accounting for a small piece of the company's liquidity holdings and that the company's operating margin is strong enough to cushion such an impact.

"The estimated one-off bonus payment accounts for only 0.06 percent of Hyundai's liquidity holdings as of 30 September 2014 on a stand-alone basis, and the annual increase in wages is likely to be negligible when compared with its unconsolidated operating income of 3.7 trillion won for the 12 months period ended 30 September 2014," the agency said.

"In addition, the company's estimated operating margin of about 8.5 percent in 2014 is robust and provides a considerable cushion against adverse external events." (Yonhap)

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