[VIEWPOINT]When Times Get Tough, Whining StartsWhenever something bad happens, people often scramble for an excuse. Two of Korea's best-known enterprises, Samsung Electronics and Pohang Iron and Steel Corp. (POSCO), are, it seems, no exception.
Oh, what a lucky situation the two companies find themselves in these days. Excuses abound for their poor performances in the first half. There's the sputtering U.S. economy, the engine of the world economy. Japan has been in a decade-long depression. Europe, which had appeared to be weathering the storm better, is suddenly deteriorating. I don't deny that these are current realities, but what these companies are saying is that unavoidable external factors are the reason for their poor performances. The whining is backed up by timely press reports about the simultaneous depression of the world's economies. Still, there is whining.
The U.S. economic depression to which the companies attribute their poor performances had already set in a year ago. The U.S. growth rate in the second quarter of last year － 5.7 percent － plunged to 1.3 percent in the third quarter. From the beginning of this year, big U.S. companies have been busy: Motorola, the world's second largest manufacturer of communication devices, General Motors, the world's biggest motor company, and Gateway, a large computer manufacturer, have all announced restructuring plans including lay-offs. That was the true messenger of approaching depression. This year, the United States saw just 1.3 percent economic growth in the first quarter and an estimated 0.7 percent in the second. The New York Times reported that U.S. economic growth had almost gone flat.
Samsung and POSCO have done little to guard against this evidently predictable downturn.
Look at who owns the shares in Samsung Electronics and POSCO and you will see they are no longer Korean companies. As of July 30, the amount of stock held by foreign investors in Samsung Electronics was 56.5 percent and in POSCO was almost 60 percent. Samsung Electronics, the world's biggest memory chipmaker, is listed on the London stock market and POSCO, the world's biggest steelmaker, is listed on both New York and London markets. They are multinationals － and too multinational to point at "overseas factors" as an excuse for their bad recent showing. It is ridiculous for those global companies to distinguish internal and external environmental factors. They should have created management plans that viewed the world as a single market from the beginning. And if that market had emitted warning signs, they should have been alerted.
Samsung Electronics belatedly announced that it had put emergency management into effect only three days after announcing that its operation profits were down 63 percent on the first quarter on July 20. A week later, it announced its mid- and long-term strategies, saying that the company would focus on nonmemory chip production because there were some limits to the memory chip sector. I do not know why those management plans were announced at that late stage; the deflation of the semiconductor market has been going on since the end of last year.
At the end of July, POSCO announced that its operation profits in the first quarter had dropped by 30 percent year-on-year. I am now wondering, given that POSCO's CEO has said he has abandoned hope for steel prices to recover, whether POSCO has now put together specific plans to check its deteriorating profits.
These companies will say that it is not as easy for them to lay off workers as it is for foreign companies. Even accepting that this is the case, they should have readied plans such as constructing flexible production lines and inducing "natural" lay-offs (such as retiring workers and hiring no new workers) at least a few months ago.
In this competitive era, corporations should have the survival instinct of an animal in the jungle. If not, according to the law of the jungle, they will become prey.
The writer is editor of international economic news at the JoongAng Ilbo.
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