Strikes Causing Financial Hardship

Kim Hui-soo, 47, is the president of Mikwang Instrument Ltd., a company which does electrical work in POSCO’s steel mills. However, he had to borrow 60 million won from a bank Thursday to pay wages to 25 employees.

Although the subcontractor has been receiving a progressive payment on the 10th of every month from Posco Engineering & Construction, there was no income at all in July, as was illustrated in its accounting book.

20 electricians of the company have no work to do due to the strike which started July 1 by the Pohang Specialty Building Labor Organization. The situation is not much different for some 150 irregular workers belonging to the company.

“If the situation drags another two to three months, the company will have no choice but go bankrupt. Although the income of the company has also been instable in the past 17 years, it has never been as bad as these days,” said Kim. Kim, who graduated from a technical high school, established the company in 1989 after working as a casual worker.

The ongoing strike, which has lasted 48 days, is threatening the survival of over 100 companies alone in Pohang, including electrical and machinery companies. These companies are also causing serious financial difficulties for companies that supply materials.

Those companies are working as subcontractors of Posco Engineering & Construction at over 30 different plants including the FINEX plant, a next generation facility in steel making technology.

Construction companies generally depend on the progressive payment paid each month to pay their workers wages and pay the rent and purchase materials. Although 20.4 billion won was paid as progressive payment on July 10, no progressive payment was made this month.

Seil Engineering, a machinery company in Pohang, had to draw out 80 million won of emergency funds to pay monthly wages to its 23 regular workers. However, it has postponed paying 350 million won for materials in June.

This company is a well established company. It has over 200 temporary workers and gets a monthly average of 800 to 900 million won in progressive payment. 500 to 600 million won a month is spent as wages and operating expenses.

“If the crisis continues further, quite a number of companies may go bankrupt. Both the company and union members are pushing to the end of a cliff, but there doesn’t seem to be a solution,” Oh Se-hyun, CEO of the company, said.

“I really need to work right now. The endless strikes messed up my family,” said Choi, who works as a casual laborer at the company.

Companies that have about 10 employees are reducing the number of their administrative staff. “This company makes money for a month to survive the month. But I haven’t seen any money this month. It is likely to close next month if the situation doesn’t get better next month,” an employee of a civil engineering company said.

boriam@donga.com