The company aims to ease employee concerns and maintain job security during the upcoming merger process.
Category: Business
SEOUL — Lotte Chemical has announced a substantial compensation package for its employees as it prepares to merge with HD Hyundai Chemical. The company, located in the Daesan petrochemical complex in South Chungcheong Province, has pledged a 500% bonus based on the basic salary and guaranteed 100% job retention for its workforce.
According to reports from the petrochemical industry, Lotte Chemical held an employee briefing on April 12, where it disclosed plans to provide a special incentive payment equivalent to 500% of the basic salary. This decision is aimed at alleviating employee anxiety and motivating staff during the merger process.
The bonus structure will see an initial payment of 100% of the basic salary before the joint venture launches in September, followed by an additional 100% paid each year over the next four years. This proactive measure is seen as a means to prevent mass employee turnover and stabilize the organization during the restructuring phase.
Starting June 1, employees will transition to a newly formed entity, tentatively named Lotte Daesan Petrochemical, before finally merging with HD Hyundai Chemical on September 1. The joint venture will adopt a co-CEO system, with Lotte overseeing sales and Hyundai managing production, alternating roles every three years.
Key issues concerning employment and treatment have been reaffirmed, with a commitment to 100% job retention. Existing employment relationships will be maintained without any artificial reduction in workforce, ensuring that salaries, allowances, benefits, and promotion systems adhere to Lotte Chemical's standards. Employees' annual leave and tenure will also be recognized in the new structure.
Some adjustments to the working environment are expected, with employees based in Seoul potentially relocating to an office in Dogok-dong, Gangnam District. Meanwhile, personnel from the Daejeon tech center will maintain their current locations for the time being but are expected to transition to an independent research facility under the joint venture in the long term.
Industry insiders have indicated that achieving a full chemical integration will take considerable time, as differences in evaluation systems, data management, welfare funds, and labor unions exist between the two companies. The immediate goal is to complete the physical integration by September 1.
In November of last year, Lotte Chemical and HD Hyundai Chemical submitted a proposal to the government for the consolidation of their plants within the Daesan petrochemical complex, marking the first restructuring plan in the petrochemical sector. Following this, Lotte Chemical announced last month that it would physically split its Daesan plant and pursue a merger with HD Hyundai Chemical.
As the government prioritizes petrochemical restructuring as a key industrial project this year, the integration of Lotte Chemical and HD Hyundai Chemical has been approved as the first initiative. The restructuring aims to reduce production facilities, particularly the naphtha cracking center (NCC), to alleviate financial burdens on companies grappling with declining supply costs and sluggish domestic demand.
Notably, the geopolitical climate has added complexity to the restructuring process. The outbreak of war between the U.S. and Iran at the end of February has heightened concerns about naphtha supply, prompting public anxiety over availability. Though the war has created supply uncertainties, experts believe that the restructuring of domestic companies is unlikely to impact consumers directly.
Several petrochemical firms in the Yeosu and Ulsan industrial complexes have postponed submitting their restructuring plans for various reasons, with major shareholders including American Chevron and Saudi Arabia. These companies may have differing perspectives from the South Korean government, especially in light of the current war situation.
As the government navigates the restructuring process, it is advised to maintain a flexible approach and a long-term perspective, considering the potential burdens and concerns for citizens. The success of this restructuring will depend on government initiatives and on the willingness and efforts of participating companies.
In this environment of uncertainty, the speed of the restructuring process may vary, even if companies agree to the pressures of cost and consumer dynamics. The government must avoid rushing the process, as fairness dictates that all participating companies should be treated equitably.
As the situation continues to evolve, the importance of strategic responses from the government becomes increasingly clear. The need for adaptive strategies in response to changing circumstances is more pressing than ever.
Looking ahead, the merger between Lotte Chemical and HD Hyundai Chemical is set to be completed on September 1, marking a new chapter in the South Korean petrochemical industry.