Ready the ballastWhile everyone’s focus is on the outcome of next week’s presidential election, the economy is losing steam at a dangerously rapid pace. The local economy grew more or less at 0 percent in the third quarter from the previous three months, prompting large companies to carry out sweeping restructuring measures.
Tongyang Group, the country’s 37th largest in corporate ranking excluding state and foreign enterprises, said it will sell some of its core manufacturing lines of ready-mix concrete and electronics. It explained that the decision is part of business rationalization to focus on thermal power generation and other energy sectors.
But industry sources see the move as cost-cutting measures to solve the group’s liquidity problems. STX Group, the 13th largest, said it will sell STX Pan Ocean, a key shipping affiliate of the shipbuilding conglomerate. STX earlier also said it will sell energy and heavy industry subsidiaries.
Other companies are also busy mapping out cost-cutting measures ranging from sales of affiliates and real estate to mergers and early retirement. Woongjin Group, 30th, has applied for court receivership.
But what’s more serious is that STX and Tongyang Group are selling off core businesses in order to stay afloat. Corporate restructuring is advisable so that companies can eliminate redundant and money-losing units and businesses to realign companies to more efficient states.
But recent corporate restructuring actions are not motivated by such a positive purpose. They are more desperate to lighten the ship against a coming turbulent storm with the gloomy outlook for the economy at home and abroad. Headwinds from overseas are expected to worsen. Large companies that primarily earn money from selling industrial products overseas will be hard hit. What Tongyang and STX have done may be a prelude to a chain of similar moves from large manufacturers and enterprises.
The repercussions on the economy would be devastating. Corporate tightening will further dampen economic recovery and worsen prospects for the job market. The government should pay serious attention to the corporate sector.
It must re-examine economic policies and take countermeasures against ramifications from corporate restructuring such as layoffs and job freezes. Large companies should shape up and work out to prepare for a long run of sluggishness. Everyone should be aware that the economy is in an emergency state.
with the Korea JoongAng Daily
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