Hyundai plans to revamp its pay structure and set wages on the basis of merit and not seniority.

In a letter to workers proposing the change, Hyundai CEO Yoon Gap-han said: “Our wages have reached a critical limit as a manufacturing company. I am concerned that Hyundai may face a situation where it is impossible to produce vehicles at domestic factories anymore.”

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The company said the restructuring would not lead to immediate cost savings or cut current wages, Reuters reported.

Hyundai’s workers union has already rejected the proposal and union leader Lee Kyung-hoon said: “The company will face strong headwinds should it not change its position.”

A union spokesman said the wage proposal would be considered only if the company includes regular bonuses in base wages. The management said this would result in even higher costs.

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