CCA sale in Korea faces strikes
by Mark Skulley and Sue Mitchell

Australian Financial Review
2 May 2007

Coca-Cola Amatil faces the threat of industrial action against the planned sale of its A$700 million South Korean bottling subsidiary unless unions are consulted and employment conditions protected.

Unions representing about 2000 workers at Coca-Cola Amatil's three South Korean bottling operations say they have been kept in the dark about the sale and are pushing for their collective agreement to be renewed.

Three unions with members employed at Coca-Cola Korea Bottling Company plants have opposed the sale of the business to private equity fund CVC Capital Partners, which has submitted an expression of interest and is believed to be on CCA's shortlist.

"We will never accept CVC owning CCKBC even if CVC agrees to guarantee union demands," the unions said. " We three unions are planning to demand that CVC should be excluded from the bidders."

The unions sent a letter to CCA last month threatening to "undertake industrial action against CCA's unilateral process" if management refused to have direct talks.

A Sydney-based union representative affiliated with the Korean unions said yesterday no agreement had yet been reached with CCA.

However, CCA said it was in regular contact with the union leadership and was confident the union stance would have no impact on the sale.

"People going into any Korean business understand what the unions are like - I don't think there would be any surprises for anybody," a CCA spokesperson said. "Obviously the people issue is a big one."

No industrial action had started and CCA had held meetings with the unions and kept communications open.

"CCA is working very hard to achieve a good outcome for all employees, other stakeholders and the long-term prospects of the business in South Korea and, at this stage of the process, we are confident of being able to deliver this," the spokesperson said.

Analysts believe high labour costs and inflexible work practices have contributed to the poor performance of the South Korean business, which has lost money or broken even over the past three years.

CCA reduced full-time staff numbers by 10 percent in South Korea last year through an early retirement plan and expected to achieve annual savings of A$17 million after one-off redundancy costs of A$27 million.

However, analysts believe the cost base remains too high and further restructuring of the workforce may be required, whether CCA proceeds with or abandons the sale and works with the major shareholder, The Coca-Cola Company, to improve performance.

According to reports from South Korea, local food and beverage companies that have expressed interest in the bottler are likely to receive a more favourable response from the unions than international bottling compnaies and private equity buyers.

"The unions won't determine who owns the assets, nor will they impact [on] the sale price as long as it's managed appropriately," one source said.

The three unions involved are members of the International Union of Food Workers, which has informed Coca-Cola workers and affiliated unions worldwide of the developments in Korea.

"Workers acting through their union have the right to protect jobs and ot insist on consultation prior to any major restructuring or sell-off," IUF Asia-Pacific regional secretary Ma Wei Pin said.

"CCA must provide accurate and timely information so that negotiations can proceed in good faith between the union and the company. IUF will do everything possible to support our affiliates in Korea to ensure that workers are not treated as disposable commodities."

© Australian Financial Review