Collective crisis for industryKorea’s major industries are in collective crisis from the economic fallout of the coronavirus pandemic.
Air carriers Korean Air Lines and Asiana Air, with more than 90 percent of their fleet grounded by the outbreak, have sent their entire labor forces on rotational unpaid leave. Doosan Heavy Industries faces a liquidity crisis due to snowballing losses after the government’s policy of phasing out nuclear reactors. The conglomerate had to seek an emergency loan of 1.3 trillion won ($1 billion). The automobile, shipping and petrochemical industries are also in their worst crisis. Electronics and shipbuilding could be next.
If Korea’s mainstay manufacturing industries responsible for exports and hiring lose ground, the economy could be wrecked beyond repair. The chain reaction would build up to a financial crisis and mass unemployment. The scale of the shock to self-employed workers and small businesses is unmatched. Competitive companies must not go down due to immediate liquidity woes. It is why governments around the world are spending massively to sustain their companies.
The government said it would map out additional protective plans for key industries in addition to the 100 trillion won relief measure. But the support must not be random. State subsidies should not go to companies that were already ailing prior to the virus spread, in order to prevent tax money squandering and moral hazards. Companies must show the will to rescue themselves through cooperation between management, employees and stakeholders. Companies without hope must go through reorganization or liquidation. The immediate shock from layoffs should be covered through stronger social security.
SsangYong Motor stands at a life-or-death juncture after its majority shareholder Mahindra & Mahindra of India decided not to inject new capital into the troubled carmaker. The company has been under liquidity woes from poor sales for years. Although the union has agreed to wage cuts, the company cannot survive without outside help. This is possible, but the decision won’t be easy. Massive layoffs and chain bankruptcies of suppliers must be avoided, but state funds should not be wasted. Selling the company won’t be easy, given the poor condition of the automobile industry across the world. Its fate must be decided after thorough study and discussions with stakeholders. And decision must not be made out of political considerations ahead of the April 15 general elections.