A cold-rolled steel line at Hyundai Steel's Dangjin plant is empty following a strike by the company's labor union in this Feb. 24 file photo. Courtesy of Hyundai Steel

Hyundai Steel declared emergency management mode on Friday, cutting executive salaries by 20 percent and announcing a voluntary retirement program for all employees.

The company said the decision was driven by the U.S. imposing a 25 percent tariff on Korean steel imports and its own declining profitability, as the domestic market faces growing competition from Chinese and Japanese rivals.

According to the company, Hyundai Steel reduced all executives' wages by 20 percent as of Thursday and will implement cost-saving measures, including minimizing overseas business trips, as it enters emergency management mode.

The steelmaker also said that it is “considering” a voluntary redundancy program for all employees to “save costs to an extreme extent.”

Hyundai Steel explained the decision was made after recognizing that “it will not be able to improve its operations without implementing strict self-improvement measures given the current business environment both in Korea and internationally.”

Hyundai Steel's Incheon plant / Captured from the Hyundai Steel website

The measures follow the company's recent cost-saving efforts. Due to the downturn in the domestic construction market, Hyundai Steel has recently scaled down operations at its second plant in Pohang. The company is also offering a voluntary retirement program for technical staff at the Pohang plant and accepting applications for transfers to other plants in Incheon and Dangjin, South Chungcheong Province.

The company said that low-priced steel products from China and Japan are capturing its domestic market share, and it is now responding with anti-dumping complaints, which are a type of protectionist tariff.

In July and December last year, Hyundai Steel filed anti-dumping complaints with the Trade Commission of Korea's Ministry of Trade, Industry and Energy, claiming that hot-rolled sheets and heavy plates from Chinese and Japanese manufacturers have harmed the domestic industry. In response, the commission provisionally imposed anti-dumping tariffs of up to 38 percent on imports of Chinese heavy plates last month.

The 25 percent U.S. tariff on steel products also poses a major challenge for the company. On Wednesday, U.S. President Donald Trump imposed a 25 percent tariff on steel products from Korea, effectively nullifying up to 2.63 million tons of the annual tariff-free quota the U.S. had agreed to with Korea in 2018.

Last month, Korea Investors Service forecasted that domestic steelmakers would face an additional cost of up to $890 million if the U.S. imposes a 25 percent metals tariff as planned. However, with the U.S. imposing tariffs on products made with steel and aluminum, the cost appears to be higher than expected.

Adding to the damage for Hyundai Steel is the ongoing conflict with its labor union.

Hyundai Steel has been struggling with wage negotiations with the union since September of last year, primarily due to issues such as performance bonuses. The union has staged multiple rounds of strikes and resumed its walkout on Wednesday in protest.

Hyundai Steel's management recently proposed a performance bonus plan of an average of 26.5 million won per person, but the union rejected it, demanding higher increases in base pay and incentives.

In January, Hyundai Steel reported 23.23 trillion won in revenue and 314.4 billion won in operating profit for the previous year, representing year-on-year declines of 10.4 percent and 60.6 percent, respectively. However, on Feb. 24, the company revised its operating profit, reducing it by 80 percent to 159.5 billion won, reflecting the impact of the performance bonus plan.

“Though we have resumed negotiations on Thursday, we failed to reach an agreement,” a Hyundai Steel official said. “Given the ongoing labor dispute, we are concerned that the conflict will inevitably have a negative impact on the domestic industrial sector.”