Car firms, real estate developers cut salaries to survive amid COVID-19 epidemic: reports

Source:Global Times Published: 2020/3/5 12:58:40

Visitors view displayed new energy cars at the 2018 Beijing International Automotive Exhibition (Auto China 2018)in Beijing, capital of China, April 25, 2018. The Auto China 2018 will last from April 25 to May 4 in Beijing. (Xinhua/Ju Huanzong)

Some real estate developers and car firms in China, which have been hit hard by the outbreak of COVID-19, are starting to cut employee salaries to survive standstill sales and tight cash flows.

Insiders at a large real-estate company in West China revealed the company had decided to limit senior executive salaries. Bonuses for these executives in the first quarter will be suspended and basic salaries will be reduced by 20 percent, according to a report from domestic news site

Salary reductions are limited to executives currently, and ordinary employees' salaries have not been adjusted for the time being, but as sales have been declining amid the epidemic, their salaries - which largely depend upon their sales performance - will also drop. 

Several other major real-estate firms across the country, such as those in East China's Fujian Province, have adopted similar strategies of cutting senior mangers' salaries.

On February 27, CapitaLand, one of Asia's largest real estate companies and headquartered in Singapore, took the lead in announcing that its board of directors and senior management would voluntarily reduce their salaries, and that their directors' fees and basic salaries would be reduced by 5 percent to 15 percent from April 1. 

Other employees are not affected, according to the firm, and the measure will be re-evaluated after six months or after the epidemic has been stabilized.

With the persistence of the epidemic, many of CapitaLand's stakeholders and partners have been deeply affected, particularly in China and Singapore. The impact of the epidemic will depend on how long it endures, said the firm.

Real estate is an industry that is highly dependent on cash flow. With sluggish sales during the epidemic and a tight domestic financing environment, firms' funding pressures have been further exacerbated.

ZodiGrand, a real-estate developer in Southwest China's Sichuan Province, was reportedly unable to pay employee wages in January and February 2020 due to a broken capital chain, requiring employees to resign and postpone the receipt of wages, according to media reports.

In addition to the real estate industry, car firms are also struggling to survive during this exceptional time.

A person close to Shanghai-based SAIC Motor told the Global Times on Thursday that the firm is now cutting salaries due to "ineffectiveness," but did not disclose further details.

Documents circulated online showed that firms under SAIC Motor are adjusting employees' salaries. One document showed that an employee's before-tax income would be cut by 22.2 percent from March, and that the recovery date would depend upon further announcements from the company.

The source from SAIC Mortor noted that not all auto firms are cutting salaries, as some performances remain stable in China.

Automobile sales in China dropped 18 percent year-on-year in January, with sales of new energy vehicles slumping 54.5 percent year-on-year, according to data released by the China Association of Automobile Manufacturers.

Global Times


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