Foreign Companies Also Face "Bleak Q3"... Covestro Korea Cuts Employee Salaries

Severe Management Crisis Expected in Second Half
6-15% Wage Reduction Planned by Job Level

[Asia Economy Reporter Hwang Yoon-joo] Covestro, a global chemical company operating in Korea, has joined the ranks of companies reducing employee wages to overcome the management crisis caused by the COVID-19 pandemic.

According to industry sources on the 17th, Covestro Korea is currently implementing a wage reduction of about 6-15% for its employees. The wage cut rates are reported to be 6% for employees below the manager level, 8-10% for executives, and 15% for board members.

This wage reduction was decided at the German headquarters level, and it is significant that the labor union first proposed it as a measure to share the burden of COVID-19 in exchange for job security. Accordingly, overseas subsidiaries in Germany, Korea, the United States, and China simultaneously began the wage reduction process. In the case of the German headquarters, under a policy to minimize restructuring, 90% of employees agreed to the wage reduction contract.

Covestro was spun off in 2015 from the chemical materials division under Bayer Group. It is most famous for developing and producing polycarbonate, a lightweight material for automobiles, and polyurethane used in seats and steering wheels is also a core product. The wage reduction for employees is inevitable due to the rapid deterioration of the business environment for major customers in the automotive and electronics sectors caused by the COVID-19 impact.

Due to this business structure, it is known that the impact of COVID-19 on Covestro is greater than on other chemical companies. In particular, about 50% of the sales of the Korean subsidiary related to automotive parts come from Hyundai and Kia Motors, and internally, it is expected that the impact of COVID-19 will intensify in the second half of this year.

Some domestic chemical companies have implemented wage cuts targeting executives. Lotte Chemical executives voluntarily returned 20% of their monthly salary for three months, and Hanwha Chemical executives have been returning 20% of their base salary since April.

An industry official said, "Consumer goods have not seen a significant decrease in sales due to remote work, but chemical companies mainly producing B2B products such as automotive parts and electronic product interior and exterior materials are greatly affected by automobile plant shutdowns and decreased sales of electronic products," adding, "Since orders are received 1-2 months in advance, the impact of COVID-19 will become more pronounced from the third quarter."

This content was produced with the assistance of AI translation services.