The problems at Sammi-Posco transaction broke out due to the deliberate attempt by Posco to avoid inheriting the union at the Sammi Steel and the collective bargaining agreement adopted between the union and management.
As a result, Posco developed a new form of acquisition aimed at bypassing the legally stipulated responsibility of providing employment guarantee in the acquisition of another company.

On December 26, 1997, the union of the Sammi Steel Co. was given a rude notice by the management
: it decided to sell off the company to Posco.

Sammi Steel Co. produces various reinforced steel plates, including reinforced steel tube(pipe).
When the details of sale was worked out between Sammi and Posco, it became known that Posco was trying to find some means to avoid taking on all the employees at the plant in order to bypass the need to accept the existence of a union.

The sale to Posco involved not the entire company itself, just one plant of the company.
2,342 employees out of a total of 3,200 Sammi Steel employees were engaged in this plant.
As a result of the sale, Sammi Steel was, in fact, handing over a part of production that was responsible for 50% of its total sales revenue.

In response to the management's decision, union called for a guarantee of continuity in employment and respect for the integrity of the existing collective bargaining agreement by the new 'management'.

The contract of sales between the Sammi Steel Co. and Changwon Steel Co. (a subsidiary of the Posco established to take over Sammi's operations) was signed on February 17, 1997.

The contract was so designed as to avoid being perceived as an acquisition of a company, but a proportion of its total assets.
The contract includes a specific reference to the question of employees.

Article 11 of the sales contract states
"the purchasing body shall undertake a survey of the employees deployed in the production facility under question to enquire into their views on seeking employment in the news company."
The contract continues to specify that the Pohang Steel will "recruit" needed workers as "new employees"
"The purchasing body shall undertake an examination of the size of workforce necessary for the operation of the purchased facility, and small undertake, through fair and resonable open selection procedure, a recruitment of new employees to meet the workforce requirement.

The contract recognises the possibility of hiring Sammi workers who have been working on the production facility.
But it calls on Sammi to terminate employment contract with those workers who have passed the 'test given by the Posco Steel.
It makes doubly clear that any 'former' employees of Sammi who have been working in the production facility being purchased by Pohang is in reality being employed anew.

The contract goes on to make a categorical statement on the issue of 'continuity of employment'.
"The purchasing body ... does not bear the responsibility to continue to provide employment to the employees of Sammi Steel who had been working on the production facility that is being purchased."
It goes on to repeat itself with a greater emphasis: "No clause in this contract may be interpreted to mean that the Posco Steel has a responsibility to continue to provide employment to those employed by Sammi."

The plant bought off by Posco from Sammi used to employ a total of 2,342 workers.
Of this, Posco enlisted 1,770 workers as "new recruits", leaving 572 workers behind.
Sammi Steel Co. - or what regains of it following the sale of the most important plant - committed itself not to layoff workers from the plant that had been sold off who had been refused by Posco Steel.
However, the remaining with Sammi Steel is no comfort at all to these workers as Sammi is incapable of generating sufficient business to provide the workers left over from the sale of its most important plant gainful work.

The sell off by Sammi was a part of the group's effort to overcome serious financial difficult.
The sale to Posco did not help Sammi at all, as the contract of sales makes categorically clear that Posco shall not in any way take over the responsibility for the debt repayment.
As a result, soon after the sale to Posco was finalised, on March 19, 1997, the Sammi Group fell into bankruptcy and court receivership.

The union at the Sammi Steel Co. demanded, when the decision to sell of its most lucrative and promising plant was announced, that the 'transaction' must guarantee the continuity of employment for the effected workers.

In response to possible instability that may arise from the Posco's take over, the Changwon Regional Labour Office advised the that "even if a part of a business is divided to set up a new firm .. recognising that employment is not an engagement with any specific management, but the business/production activity itself .. if there is in reality a continuity in the business/production activity without categorical change, then, the employment relations existing in the business/production activity must also be respected and continued."
The regional labour office went on to recommend Posco to "undertake all possible measures to avoid employment insecurity as a result of the transaction."

Despite growing public pressure, Posco remains obstinate in refusing to provide employment guarantee to all the workers of the plant that it had taken over.
The Sammi Steel Co. Workers Union continues to call on the Posco to respect former employment contract.

Union maintains that Posco has responsibility to guarantee the former employment contract workers at the plant had with Sammi.
Furthermore, it call on the sheer abusiveness of Posco in insisting that it can only take former employees of Sammi on board as 'new recruits' or apprentices.
This attitude, the union asserts, is ludicrous and unacceptable as the average age of affect workers is 40, while the average length of employment period is 15 years.